China’s coal imports plunged in October to the lowest this year, with supplies from Australia particularly hard hit amid an ongoing political dispute.
However, there are other factors at work and while the decline in imports from Australia is a headline-grabber, it’s far from the only story in play.
China imported 13.73 million tonnes of coal of all types in October, according to customs data, a drop of 27% from September and 47% weaker than October 2019.
A breakdown of imports by country isn’t yet available, but Refinitiv vessel-tracking and port data shows both top suppliers, Australia and Indonesia, saw significant declines.
Seaborne imports were 10.03 million tonnes in October, according to Refinitiv, with the difference to official figures being explained by the customs data including overland imports from neighbouring countries, mainly Mongolia.
Of the seaborne imports, the top supplier was Indonesia with 3.14 million tonnes, down 26.8% from September’s 4.29 million.
China’s imports from Australia dropped to 2.25 million tonnes, down a massive 62% from September’s 5.87 million.
These numbers suggest that Australia is indeed being targeted by Beijing, with the government taking out its displeasure with Canberra’s calls for an international investigation into the origins of the novel coronavirus out on trade.
It’s not just coal being hit by the cooling relations between China and Australia, with reports that customs officials have told importers that shipments of copper ore, barley, sugar, timber and lobsters will also face increased inspections.
So far though, Beijing has avoided escalating restrictions to the two commodities that really matter, iron ore and liquefied natural gas, perhaps because it will be harder for China to source alternative supplies, especially for iron ore.
But while the October coal import figures look dire for Australia, the data for the first 10 months shows Indonesia should be concerned as well.
China’s imports from Indonesia, the world’s biggest shipper of thermal coal used in power plants, dropped 24.5% in the first 10 months of 2020 to 86.88 million tonnes from 115.03 million during the same period last year, according to Refinitiv.
Imports from Australia dropped a more modest 10.6% to 70.49 million tonnes from 79.85 million, perhaps a reflection that much of Australia’s supplies are coking coal, used to make steel, and sourcing alternatives is somewhat harder, with the United States, Canada and Mongolia the only real options.
Additionally, China appears to be trying to diversify its coal suppliers, with shipments from Russia gaining so far this year.
China’s seaborne imports from Russia in the first 10 months of the year were 28.57 million tonnes, up 25.8% from the 22.28 million for the same period last year.
There is another trend to consider as well, with China restricting customs clearances for coal toward the end of the year in a bid to keep import volumes at a fairly constant level on an annual basis.
This trend saw only 2.77 million tonnes cleared in December 2019 and 10.23 million in December 2018, and in both those years imports in the fourth quarter showed a dramatic slump from the proceeding quarters.
The pattern is likely to repeat in 2020, meaning fourth quarter imports may be substantially lower than those for the rest of the year.
The main question for coal exporters is how the pain is shared, and here the numbers suggest that indeed Australia is now taking the major hit, but so also is Indonesia.