China has added to its already surplus supply of coal export quotas, handing out 25 million tonnes in a second batch that is unlikely to be fully taken up given poor exports so far this year.
Last year's second batch of quotas was eagerly awaited as thermal coal prices more than doubled from the start of the year to a record high around $200, but the global economic slowdown has hit demand from Asian power utilities, while mine shutdowns have kept domestic prices above global levels.
"Given the current export situation, most likely the quotas are not going to be used up this year. This year's exports so far are way below the first batch quotas," said Judy Zhu, an analyst at Standard Chartered.
The latest batch brings total export quotas to 51 million tonnes for 2009, 7 percent higher than the 2008 quotas, the National Development and Reform Commission said on its website on Wednesday. (www.ndrc.gov.cn)
But China exported just 10.5 million tonnes of coal in the first five months of the year, while Chinese imports have jumped to record highs in recent months.
Imports in the first five months reached 32.2 million tonnes, according to customs data. [ID:nSHA86979]
June data is expected to be released later in the week.
China, the world's largest coal producer and consumer, is on course to be a net coal importer for the first time in 20 years, as low prices in the international market and sluggish demand discourage exporters, analysts said.
"Even if coal miners have the ambition to export more in the second half of the year, it's difficult due to the low prices in the export market," said Huang Teng, a consultant at Beijing LT Consultants Ltd.
China only has four licensed coal exporters, all state-owned: Shenhua Group, China National Coal Group, Shanxi Coal Import & Export Group and China Minmetals Group.
Several analysts have forecast Chinese domestic coal prices, now hovering around $89 a tonne, could rise in the coming months on the back of summer demand and economic growth.
This is raising concerns among buyers that higher prices in the domestic market could prompt Chinese miners to renege on previously agreed export contracts, choking off supplies to some North Asian buyers.
China's power output rose on the year in June for the first time since last October, thanks to a pick-up in the economy and rising temperatures.
Supply has also been improving, as some of China's small coal mines are slowly returning to production, months after being shut down in strict safety inspections ordered by Beijing.
China's coal market is likely to be in balance, or perhaps show a small surplus, as a result, analysts said.
SourcE: Reuters
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