China's coking coal imports fall by nearly 30% in CY'21 despite steel production of over 1 bn t

*Imports from Australia drop sharply

*Met coke production largely stable on high exports

*Structural shifts in steelmaking affecting coke usage

The China Iron and Steel Association informed on 10 Jan'22 that China's crude steel production is expected to drop by around 35 million tonnes (mn t) in 2021 to 1.03 billion tonnes (bn t) from 1.065 bn t in 2020.

However, the country's coking coal production registered a marginal growth in CY'21 despite extreme weather disruptions and frequent mine inspections and environmental policies. Production stood at 404.5 mn t in Jan-Oct'21, up 1.7% year-on-year, as per SteelMint data. In CY'20, total coking coal production stood at 470 mn t.

Imports from Australia fell drastically due to China's unofficial ban on Australian coal to lower than 5 mn t from 35 mn t in CY'20.

But the supply gap was plugged with rise in imports from the USA, which were under 1 mn t last year but reached more than 9 mn t in Jan-Oct'21, data reveals. During this period, imports from Russia rose to nearly 10 mn t vis-a-vis 6.7 mn t in CY'20.

Coal imports from Mongolia were severely affected in CY'21. Ganqimaodu Port, one of the largest coal import channels between China and Mongolia was closed several times due to the pandemic and the number of daily passes for transport vehicles was capped below 200, far below 600 to 1,000 vehicles on normal days for much of CY'21.

The country's metallurgical coke production is estimated to fall slightly to 456 mn t in CY'21 from 468.5 mn t last year on steel production curbs, environmental restrictions, etc. but exports surged in CY'21 breaking a year-long spell of China being a net importer of met coke.

In fact, strong export sentiment amid recovery in steel production in other countries after the second wave of COVID-19 restricted production levels from falling, SteelMint notes.

Higher scrap consumption in steelmaking is a structural trend and the government has recently reduced the value added tax (VAT) on scrap from 13% to 3% to encourage more usage. SteelMint data shows that total steel scrap generation in CY'21 was 270 mn t, of which 230 mn t was used in steelmaking.

During Jan-Nov'21 scrap consumption per tonne of steel averaged at 215.64 kg/t, up 9.4 kg/t or 4.5% y-o-y. Scrap use in BOFs accounted for 162.96 kg/t, up 7.2kg/t or 4.6% on the year. EAFs consumed 647.92kg/t, down 7.1 kg/t, or 1.1% y-o-y mainly because of power shortage that arose from coal supply issues.

China is targeting domestic scrap generation of 370 mn t by 2030 and wants to raise the share of EAF steelmaking to 20% of total crude steel production by 2025. For perspective, domestic scrap generation was just about 90 mn t as recently as CY'16.

Previously, mid-scale BFs (650 m3) that used 100% coke are now using 400 kg coke and 140 kg of pulverised coal injection (PCI) coal per tonne of hot metal. Large BFs, such as those 1,000 m3 in size, are using 380 kg coke and 150 kg PCI.

Some advanced mills such as state-owned Baosteel use 280 kg coke for a tonne of liquid metal, while Ansteel uses 330 kg. Bensteel, which has come under Ansteel, uses 360 kg per tonne of hot metal, as per SteelMint estimates.

China's decarbonisation goals are driving these structural changes but maintaining the scale of the country's steel production (considering 2020 as the peak) will not be possible sans the huge BF-BOF steelmaking infrastructure.

However, stronger focus on domestic coal production and efforts to diversify seaborne supply sources are expected to impact coal imports while minimising dependence on traditional sources of imports.