China: Coking coal imports fall 9% m-o-m in Jul'21; domestic met coke prices shoot up

China's coking coal imports fell 8.78% month on month to 3.77 million tonnes (mn t) in July as inflows from major suppliers such as Mongolia and USA declined, as per the country's latest customs data released on 22 Aug'21.

China's coking coal imports from Mongolia fell 41.17% m-o-m to 497,730 mn t in Jul'21, down 77.40% year on year. A similar decline in volumes was observed with US coking coal exports to China, which fell 32.16% m-o-m to 636,375 mn t in Jul'21.

The decline in import volumes from Mongolia was expected by market participants as the resurging Covid-19 situation persists along the Mongolia-China border. During Jan-Jul'21, China imported 26.05 mn t of coking coal, down 42.72% y-o-y.

Meanwhile, imports from Russia were steadily making their way into China with imported volumes at 1.23 mn t in Jul'21, up 6.30% m-o-m and up 141.06% y-o-y. Imports from Indonesia also increased by 74.95% m-o-m to 306,747 mn t, up 127.07% y-o-y.

The customs data also showed that China exported 685,126 mn t of metallurgical (met) coke in Jul'21, down 1.50% m-o-m but up 75.50% y-o-y.

At the same time, China's met coke imports increased 101.88% m-o-m to 73,756 mn t in Jul'21, with Japanese met coke accounting for the bulk of inflows at 73,756 mn t. For the first time in eight months, customs data reflected Australian met coke imports, and the volume thereof was 38,500 mn t.

Shortage of imported coking coal lead to rising raw material cost for met coke production

Traditionally, China's coking coal imports have mainly originated from Australia and Mongolia - China's imports of coking coal from the two countries accounted for 86.7% of total imports in 2019. However, since mid-October 2020, China's imports of Australian coking coal reduced drastically due to restricted customs clearance of Australian coal at Chinese ports.

Over the past few months, Mongolia has become the primary source of coking coal for China. Simultaneously, China's coking coal imports from Russia and Canada have increased significantly.

China imported 8.346 mn t of Mongolian coking coal in the first half of this year (H1 CY21), a y-o-y increase of 14.3%, accounting for 37.3% of China's total coking coal imports during H1 CY21.

Besides, China imported 4.406 mn t of coking coal from Russia, a y-o-y increase of 51.9%; accounting for 19.7% of China's total coking coal imports during H1 CY21.

China also imported 4.028 mn t from Canada, a y-o-y increase of 52.9%; accounting for 18.0% of China's total coking coal imports during H1 CY21.

But, although China has increased its coking coal imports from Mongolia, Russia, Canada et al., it has not been able to make up for the supply gap caused by the suspension of Australian coal imports.

Notably, China imported 22.362 mn t of coking coal in H1 CY21 (Jan'21-Jun'21), a decrease of 15.813 mn t as against corresponding period last year (CPLY), and a y-o-y decrease of 41.1%, according to customs' statistics.

At present China's coking coal imports from Mongolia have been hugely affected due to resurgence of the Covid-19 pandemic since August. Stringent import restrictions and potential supply disruptions have caused the Chinese coking coal market to rise sharply.

As of 23 Aug'21, the price of Tangshan coking coal is CNY 2,320/t, an increase of CNY 360/t or 18.4% from the end of July.

Met coke supply and demand are tight, prices have risen significantly

China's met coke production fell for two consecutive months in June and July, due to the decrease in imports of coking coal and increased environmental protection restrictions. According to data from the National Bureau of Statistics, China's met coke output was 38.91 mn t in Jun'21, down 3.2% y-o-y; while in Jul'21, it was 38.79 mn t, down 2.9% y-o-y.

Alongside, however, China's met coke export volume has increased substantially as a result of an increase in met coke demand following the post pandemic recovery of overseas economy.

China exported 4.1 mn t of met coke in H1 CY21 (Jan'21-Jun'21), an increase of 1.95 mn t or 90.7% compared with CPLY.