After nearly a year of implementation, China’s provisional zero-tariff rate for coal imports will be extended from April 1 to the end of the year, further boosting domestic coal imports and ensuring market supply.
　　Since the beginning of this year, China’s coal market has generally remained weak, with market supply significantly increasing compared to earlier periods. Market analysts believe that, against the backdrop of rising domestic supply and continued growth in imports, coal prices are likely to continue their volatile and downward trend throughout the year, leaving the market in a situation of ample supply.
　　The zero-tax-rate period for coal imports has been extended.
　　Against the backdrop of persistently high international coal prices earlier on, China implemented a temporary zero-rate import tariff on coal from May 1, 2022, to March 31, 2023, which played a role in boosting coal imports.
　　Recently, the Tariff Commission of the State Council issued a notice extending the validity period of the provisional zero-tariff rate for coal imports. From April 1, 2023, to December 31, 2023, the provisional zero-tariff rate will continue to apply to coal imports. The tariff applies to coal raw materials such as bundled coal, compacted coal, expanded coal, and pelletized coal.
　　“Looking at the overall situation of the chemical industry this year, the coal market supply is relatively ample. As crucial foundational materials supporting the nation’s economic and daily life activities, excessively high prices for coal and steel can have negative impacts. Therefore, continuing the policy of zero tariffs on coal imports is a move that aligns with the goal of stabilizing coal prices,” said Cheng Xiaoyong, Deputy General Manager of the Guangzhou Jin Kong Futures Research Center.
　　Ren Lijuan, a coal analyst at Shanghai Steel Union, believes that extending the zero-tariff policy on coal imports will indirectly boost domestic coal supply, thereby helping to keep domestic coal prices low. The extension of the zero-tariff policy will have a positive impact on increasing imports of coking coal and thermal coal, as more imported resources flow into the domestic market, enhancing the marginal increase in domestic supply.
　　“With the import tariff reduced to zero, import costs will be lowered. Taking coking coal as an example, compared to the originally planned tariff increase, the current price of Russian and Mongolian No. 5 raw coal has seen a reduction of between 40 and 50 yuan per ton,” said Ren Lijuan. She added that the extension of the zero-tariff period will boost trade companies’ enthusiasm for imports, put greater pressure on domestic coal enterprises, and accelerate the optimization and upgrading of the coal industry structure, thereby phasing out more inefficient and overcapacity production.
　　Under a series of policies aimed at ensuring supply and stabilizing prices, China’s coal production has increased significantly in recent years, and market supply has remained consistently ample.
　　According to the latest data from the National Bureau of Statistics, from January to February 2023, China’s coal production by industrial enterprises above a designated size reached 730 million tons, an increase of 5.8% year-on-year. The average daily output was 12.37 million tons, up 740,000 tons per day compared to the same period last year (a year-on-year increase of 6.3%). From January to February 2023, coal imports totaled 60.64 million tons, representing a substantial year-on-year increase of 71.3%, ending two consecutive months of year-on-year declines.
　　Coal prices are showing weak performance.
　　Since the beginning of 2023, the coal market has seen a relatively loose overall supply situation, and coal prices have been fluctuating downward in a volatile manner, with the range of fluctuations narrowing compared to last year.
　　Li Haiyan, an analyst at Shengyi Society, said that the coking coal market generally remained weak in March. Currently, mining operations are largely back to normal, but due to lower procurement intentions from downstream coke producers recently, shipments from mining areas have been somewhat affected. Online auctions have also seen instances of failed bids, and prices for certain coal varieties have adjusted within a narrow range.
　　Pei Yamei, a coking coal analyst at Lange Steel, also noted that coking enterprises initiated price hikes in early March; however, due to shrinking profits among steelmakers, these price hikes were put on hold. As a result, ex-factory prices for coke in mainstream regions remained stable, while port-delivery prices fell along with the weakening of futures prices. Recently, with the resumption of customs clearance for Australian coal and continued high levels of clearance for Mongolian coal, imports of coal are expected to increase, causing the center of gravity for raw coal prices to shift downward.
　　In the thermal coal market, the off-season trend has become evident. According to data from CCTD China Coal Market Network, the high inventory situation at northern ports remains unchanged. Currently, inventories at ports around the Bohai Sea have once again approached the 27 million-ton mark, with Qinhuangdao Port’s coal stocks even breaking through 6.2 million tons. Before maintenance periods begin at various ports, inventories remain relatively ample.
　　Meanwhile, as the traditional off-season for coal consumption in power generation sets in, daily coal consumption at coastal power plants in China has generally weakened. With market confidence remaining weak, non-power end-users are also largely maintaining low inventory levels, and market purchasing activity is noticeably sluggish. This week, the number of ships anchored at ports along the Bohai Sea region has fallen to around 90 vessels, indicating that short-term procurement demand remains pessimistic.
　　The loose supply situation may continue.
　　In 2023, against the backdrop of ample coal supply, the combined impact of increased domestic production capacity and higher imports of coal from abroad is likely to push the coal market into a generally weaker trend, with prices continuing to shift downward.
　　Ren Lijuan believes that since the energy crisis of 2021, amid the broader context of boosting production and ensuring supply, the pace of adding new coal production capacity and building new mines has accelerated. According to incomplete statistics, in 2023, China is expected to add 26.3 million tons of coking coal capacity and approximately 210 million tons of thermal coal capacity. Moreover, the earlier Russia-Ukraine conflict led to a reshaping of the global coal supply landscape; as import coal prices rose, a long-term price inversion between imported coal and domestic coal prices emerged. However, with geopolitical tensions easing in 2023, international coal prices have fallen more sharply than domestic prices, rekindling arbitrage opportunities in coal import trade and prompting imported coal resources to once again exert pressure on the domestic market.
　　In her view, with the lifting of COVID-19 control policies in 2023, imports of Mongolian coal saw a significant increase. Imports of Australian coal have also been fully liberalized, and Russia’s coal supply is expected to rise markedly this year. Moreover, the continuation of the zero-tariff policy on imported coal will further boost coal import volumes. At the same time, amid policies aimed at stabilizing crude steel production and weakening demand in the steel industry, crude steel output is projected to continue declining in 2023. Current estimates suggest that downstream molten iron demand will decrease by around 10 million tons in 2023, which will in turn lead to a reduction of roughly 7 million tons in coking coal consumption. Although the temporary rebound in steel prices will have a substantial impact on upstream coal prices, overall coal prices are expected to decline for the year as a whole, though occasional short-term rebounds can be anticipated.
　　Cheng Xiaoyong stated that, given the stable and improving economic trend in China this year, the momentum behind the “dual carbon” policies is expected to further strengthen. In the process of “decarbonization,” energy costs will undoubtedly rise; as a foundational energy source, coal needs to remain at low levels in order to serve as a supplementary fuel.
　　Therefore, it is a general trend that coal prices will remain within a reasonable range. On the downstream demand side, thermal coal has yet to reach its peak summer electricity consumption, and coking coal has also failed to perform well during the spring peak season. We’ll need to keep an eye on whether the strong demand expected for April and May will materialize. If the earlier strong expectations prove to be unfounded, coking coal could face further downward adjustments.
　　Li Haiyan analyzed that coking coal prices have remained relatively stable for nearly two months now. Although port-delivery prices have undergone some adjustments, the magnitude of these adjustments has been limited. Overall, coking coal supply is slightly more abundant, and market sentiment leans toward a bearish outlook. The competitive dynamics between coking coal and steel producers are strong. It is expected that, in the short term, the weak balance between supply and demand will be difficult to break, and coking coal prices are likely to continue their current stable trend.