Coal imports into China are expected to decline this year, a potential negative for dry bulk shipping, which had been counting on growth. China’s demand indicators usually lead the direction for dry bulk freight rates, which have been boosted by grains and minor bulks, with expectations of increased iron ore and coal trades this year. Any drop in China’s import needs will therefore likely dent earnings prospects.

Speaking at the Coaltrans conference, Fenwei Digital Information Technology Co general manager Feng Dongbin said China’s total coal imports were estimated to reach 258m tonnes, down 15% year on year. Thermal coal is estimated to drop by 12% to 203m tonnes, while coking coal is expected at 55m tonnes. That is 24% below the past year’s import level, he said.

In the first two months of this year, total imports dropped 40% to 41m tonnes, comprising 35m tonnes of thermal coal, a drop of 34%. More significant was the decrease in coking coal imports of 58% versus the year-ago period.  The reason for the decline can be attributed in part to higher import prices versus domestic supplies, he said, adding that new coal mines have gradually been commissioned, with 146m tonnes added in 2020 and a further 143m tonnes expected to be added this year. Domestic coking coal capacity is expected to see an additional 39m tonnes this year, while imports may be curbed by policy uncertainties, leading to a structural shortfall, Mr Dongbin said.

Amid curbs on Australian coal, thermal supplies can be substituted by Indonesia and other regions, or increasing domestic output, but coking coal alternatives are harder to find, he noted. In December, no imports from Australia were recorded. Separately, Mitsui OSK Lines anticipates a downward trend in China’s imports this year, even though currently, the country’s steel production and iron ore imports continue to rise.

China’s steel output reached 83m tonnes in February, up 11% from the same month last year, according to the latest statistics from the World Steel Association. Shipping association BIMCO has been warning of a long-term slowdown in iron ore and coking coal demand as China increasingly uses scrap metal in steel-making furnaces as Beijing focuses on its environmental protection policy.