China’s coal imports
China is the world’s top iron ore and coal consumer. China’s coal trade accounts for almost a quarter of the global trade. In 2014, China imported 291.2 million tonnes of coal. Iron ore and coal each account for nearly 30% of the world’s dry bulk trade volume.
The Guggenheim Shipping ETF (SEA) or dry bulk shippers like DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Holdings Inc. (NM), and Safe Bulkers, Inc. (SB) that haul key dry bulk materials—like iron ore, coal, and grain—across the ocean have a direct correlation with the commodity imports’ data.
According to data from the General Administration of Customs, China imported 27.22 million tonnes of coal. It was the second highest level this year. It was an increase of 29.4% from November. Rising domestic prices encouraged end users to ramp up orders for cheaper coal overseas.
For 2014, the total coal imports were 291.22 million tonnes—compared to 327.1 million tonnes in 2013. This was after many years of double-digit growth—mainly due to excess supply within the economy. It prompted Beijing to roll out measures to curb imports.
A coal analyst, Zhang Xiaojin, commented that the annual drop caused the government to pressure utilities to cut fourth quarter imports by about 50 million tonnes. Zhang said that the outlook for imports in 2015 was uncertain as Beijing starts to roll out tougher quality restrictions on overseas shipments. Demand usually tapers off around March and April due to seasonal factors.
The country’s coal association said that China will take more actions in 2015 to control coal supplies and support the fuel prices. The industry’s outlook will likely remain poor because of overcapacity and weak economic growth.
Port Hedland and Brazil account for a major portion of iron ore exports. They have a significant impact on the dry bulk shipping industry. We’ll discuss this more in the next two parts of this series.