Bulk carrier cargoes of coal form a big part of China’s commodity imports. Last year saw a jump in volume amid the reviving economy and stronger energy demand. But it is not clear whether the higher level of coal imports will be maintained in 2024, and the outlook over several years ahead points to downwards pressures.
In 2023 China’s seaborne coal imports, calculated at 375 million tonnes were up by 132mt or 54% compared with the previous year’s relatively low volume of 243mt. The 2023 total contributed 17% of all dry bulk cargo imported by China, the second highest element after iron ore.
Of particular significance last year was the coal growth contribution to global trade’s progress. In 2023 the spectacular 132mt upsurge in China’s coal imports comprised three-quarters (74%) of the entire growth in global seaborne dry bulk trade, according to calculations based on Clarksons Research data. Another remarkable statistic is China coal imports growth as a proportion – 43% – of all world seaborne trade volume’s 2023 rise.
Coal use grows
Last year’s coal imports expansion was a notable feature of the bulk carrier freight market. But comparison with the immediately preceding relatively low annual volume exaggerates the change. In 2022 purchases from foreign suppliers were held back by China’s slow economic activity pace amid coronavirus pandemic control restrictions.
When the pandemic restrictions were lifted at the beginning of last year and an economic upturn began, energy demand strengthened and more coal supplies were needed. The production of coal at domestic mines within China responded and annual 2023 output rose by 3% to 4.66 billion tonnes.
While rising domestic coal production boosted supplies, another factor restricted energy available for power stations, the main energy consuming sector. Reduced hydro-power output resulting from low rainfall and reservoir water levels in turn raised demand for alternative energy supplies including coal, amid the recovering electricity consumption trend. These changes occurred against a background of continuing uncertainty about world energy supplies, incentivising a renewed emphasis in China on energy security.
How will the trend ahead unfold?
A major question for bulk carrier owners and operators in 2024 is: to what extent will China’s coal imports again provide a major freight market support?
Early signs may be interpreted as positive. Official customs figures for the first 5 months of 2024 show further growth. China’s coal imports during this period (including overland volumes from Mongolia, but mostly seaborne trade) were reported as totalling 205mt, a 13% increase compared with the same period of last year.
Apparently the continuing economic recovery with its effects on coal-using industries is still providing a consumption boost, and domestic coal output in this year’s first four months was reportedly 3% lower than seen a year ago. Attention has again been drawn also to the impact of attractive prices for coal on international markets – compared with domestic coal prices, when the purchases were arranged – as a stimulus. Supply security and maintaining adequate stocks also may be a contributing influence.
But it is uncertain whether the current short-term rate of coal imports expansion will be sustained in the months ahead. Some analysts doubt whether the annual 2024 total will show any increase, and suggest that a substantial decline is actually more likely.
China’s energy supplies this year are expected to benefit from a large expansion of renewable energy especially solar power generation, and possibly from a solid recovery in hydro-power output following recent abundant rainfall in several areas.
Changes in many of the influences determining seaborne coal imports into China during the period ahead are difficult to predict. One prominent feature is that although these volumes are a large part of global coal cargo movements, the imports are a small proportion (only about 7%) of China’s domestic coal market. Consequently a limited percentage rise or fall in domestic supplies of coal has a much greater potential proportionate impact on foreign buying.
Additionally there is potential for variations in Chinese government policy on aspects of consumption, production, stocks and imports of coal, responding to changing circumstances. Together with uncertainty about most of the other factors, this emphasises the problem of providing reliable coal import forecasts.
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