China’s Iron Ore & Coal Imports: Alternating Trajectories

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By Derek Langston, Head of SSY Consultancy & Research

For three consecutive months from June to August China’s imports of coal (including lignite), gauged by customs data, have experienced annual growth, having lagged year-ago levels in each of the first five months of the year (see chart).

Conversely, iron ore imports grew by a combined 27 Mt during January-May inclusive, before registering some sizeable annual falls in the following three months totalling almost 40 Mt.




Rather than simply creating confusion about the direction of the Chinese economy, these alternating trajectories demonstrate the influences facing seaborne iron ore and coal trades into China.


The return to annual growth for coal imports happened against a background of ongoing tightness in domestic supply and low inventory levels within China. In addition, the voluntary avoidance of Australian coal, plus a wide variety of logistical issues reported at alternative suppliers have conspired to push China’s domestic steam coal prices to record levels, with coking coal also at historical highs.


Although coal imports into China are apparently incentivised, some constraints on imports can be identified: (1) from a lack of available stems on international markets, with additional quarantining time required for shorthaul trips from Indonesia exacerbating issues for some mining operations caused by heavy rainfall and flooding, (2) returning hydropower capacity in the case of steam coal following drought conditions in the 2q21, and (3) industry reports suggesting some end-users’ hope that government intervention would boost the supply of domestic coal or that a seasonal retreat from peak demand in September would ease some price pressures.


This year’s import growth of iron ore into China has been amplified in part by last year’s China-centric market conditions, which saw inbound volumes surge to a quarterly all-time high in the 3q20. This year competition from the steel sector recovery in the rest of the world has added to international iron ore supply constraints.


Further demand uncertainties in China have been generated by discussions of government-mandated steel production controls for the remainder of the year, reportedly aiming to keep 2021 annual output at 2020 levels and have injected fresh volatility into iron ore prices (benchmark prices are more than $90/t below the July peak at time of writing). These are in addition to winter anti-pollution measures affecting steelmaking, which will have extended coverage in the 1q22 owing to several events in the Beijing Winter Olympics and pose a longer-term threat to China’s iron ore consumption.


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