China coal export freeze sends prices soaring

Chinese shipping companies had been forced to divert their vessels to load coal for China, with the country in the grip of a severe power crisis, Reuters reported. China told world miners and port authorities to stop thermal coal exports for the next two months to help end a severe power crisis, sending benchmark Newcastle coal swap prices sharply above US$100 per tonne. The prices also soared on news of South African power shortages as well as floods in Australia, which saw the country’s largest coal exporter, BMA, declare force majeure last week. China’s export halt was announced on a Ministry of Communication website and came when coal supplies were extremely tight at most exporting countries, due to strong demand and logistical problems. &#8220During Chinese New Year and parliamentary meeting, all thermal coal exports will be suspended,&#8221 the ministry said. Chinese New Year begins on February 7 while the two-week parliamentary meeting finishes by mid-to-late March. &#8220Where there is a need, all international shipping capacity will be diverted for domestic transportation requirements,&#8221 the ministry said. China Shipping Group has been forced to divert six ships from its international shipping fleet to queue at ports for coal while Cosco has diverted 11 vessels. Australia’s coal producers all claim to be heavily restricted by coal chain capacity, particularly through the port of Newcastle and Queensland’s Dalrymple Bay Coal Terminal. China’s top coal ports, heavily congested Qinhuangdao and Tianjin, were still loading vessels yesterday (Monday, January 29) because the bulkers had already been selected. Colombia is the only major coal exporter not facing low stocks, rail transport or port difficulties, weather-linked problems or surging demand, traders said. China supplies coal to power plants in Japan and South Korea. Customs figures in December revealed that 2m tonnes of coal was exported to South Korea in 2007 and 1.7m tonnes to Japan. Also pushing up coal prices was a power crisis in South Africa. The miner Anglo American has halted mining at five of its nine coal operations, in the Mpumalanga province in the country’s northeast. The mining giant was unable to say when normal power supply would be returned or how much output would be affected. Meanwhile, Indonesia has cashed in on slowing growth in Australia’s coal export volumes, exporting three times more coal to China in 2007 than it did the previous year. But Chinese Government figures said China had imported 34% less coal from Australia. Coal chains in Queensland and New South Wales are undergoing expansion, but growth is slow at a time when Indonesia and other southeast Asian coal-producing countries have been able to increase supply. Indonesia exported 14.1m tonnes of coal to China last year, well and truly overtaking Australia’s volumes, which dropped to 4.5m tonnes. Vietnam exported 24.6m tonnes to China, about half of China’s total coal imports. China became a net importer of coal this year, boosting demand from countries, such as Australia and Indonesia, as China continued its burgeoning infrastructure investment. China’s total demand for coal is expected to rise to more than 2.7bn tonnes this year, according to a Bloomberg report.

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