China's appetite for foreign coking coal may moderate over the coming months, but the country won't become a net exporter again due to an overhaul of its mining sector and ongoing demand from coastal steel mills.
That’s good news for Australian producers which provided the majority of China’s coking coal imports in the January-July period, after demand from traditional importers Japan, South Korea and Europe buckled.
China shipped in 18 million tonnes of coking coal in the first seven months of 2009, making it the world's second-largest importer.
Demand from Indian steel mills is also helping to keep the market tight, and analysts are expecting a fresh wave of mergers and acquisitions in Australian coking coal as India and China seek greater control over supply lines.
BHP Billiton this week said it expects China to import 30 million tonnes this year, out of a global seaborne market of 140 million tonnes.
BHP's comments are closely watched because it is the world's largest miner and, through its BHP Mitsubishi Alliance, the world's largest coking coal producer for the seaborne market.
“A small percentage of high-quality coking coal imports into China looks sustainable given the push towards coastal, larger mills which require higher-quality coking coals,” BHP Marketing President, Tom Schutte, said.
This ties in with estimates by analysts who expect the pace of China's imports to taper off. They believe higher freight rates and falling domestic coal prices in China will make seaborne coal less competitive.
In addition, demand from India is expected to grow 5 per cent to 6 per cent annually from a high base of 28 million tonnes. India's domestic coking coal output is small.
"The focus is on China, but both (countries) are as important as each other in the long term," Nam Le, analyst at Australian Mineral Economics, said.
Support for the seaborne market is coming from a wave of safety checks at small mines in China after an accident in Henan province this month killed at least 44 people. This is the latest in a string of accidents that have forced many smaller mines that have the poorest safety record to shut down temporarily.
Macquarie estimated checks in Henan following the blast at the Pingdingshan coal mine would shut in about 3 million tonnes of coking coal output for a month.
That may appear small beer for China's domestic coking coal industry, which churns out 475 million to 500 million tonnes a year. However, much of China's supply growth has come from small mines.
"As the coking coal industry is consolidated, mining should become a more-regulated, more-capital-intensive and more-ponderous activity. It may be difficult to maintain historical growth rates given a new industry structure," Macquarie said.
Australia meets about 60 per cent of global seaborne demand, as infrastructure constraints and regulatory uncertainty hold back potential competitors like Mozambique and Mongolia.
Reliability of its supply has prompted China's largest mill Baosteel Group to agree to buy a 15 per cent stake in Aquila Resources, and Yanzhou Coal Mining to offer $3.54 billion for Felix Resources.
Patersons Coal analyst Andrew Harrington said dozens of Indian companies are "kicking tires" in Queensland.
Last month, Caledon Resources said it was in talks over a takeover offer of up to $US1 billion from India's Essar Minerals.
"Coking coal imports into China are a small story. Future growth will come from India, where there's negligible coking coal," Mr Harrington said.
Source: The Australian
No comments:
Post a Comment