China to Boost Coal Imports on Wider Price Gap: Chart of the Day

China is poised to accelerate coal imports to take advantage of the cheapest international prices in 20 months relative to domestic supplies.

The CHART OF THE DAY shows the price difference in southern China for thermal coal delivered from the northern Chinese port of Qinhuangdao compared with shipments from Newcastle, Australia. The gap expanded last month to as much as $8.30 per metric ton, the widest since August 2010, according to data from CLSA Ltd. Also tracked are China’s monthly coal imports, which typically climbed as the price spread expanded.

“China’s coal imports will probably increase due to the wide premium” of Qinhuangdao over Newcastle prices, said Helen Lau, a Hong Kong-based analyst at UOB-Kay Hian Ltd. “The price gap could narrow with Newcastle prices rebounding on higher demand from China.” Newcastle is the world’s biggest coal harbor.

Chinese demand helped a recovery in the regional seaborne coal market in 2009, when the world’s biggest consumer of the fuel became a net importer for the first time as Chinese buyers snapped up cheap overseas supplies. Rising imports this quarter may keep the price of Newcastle coal with a heating value of 6,700 kilocalories per kilogram, a benchmark grade for Asia, at an average of $112 a ton, Lau said. The price was at $101.55 on April 20, IHS McCloskey data compiled by Bloomberg show.

The Chinese government seeks to encourage coal imports and cap annual domestic production at 3.9 billion tons by 2015 to curb pollution, according to a five-year plan released by the National Energy Administration in March. China’s growing demand for electricity has been supporting domestic prices of the fuel.

China’s coal imports rose for a second straight month in March, to 17.1 million tons, according to customs data published yesterday. Imports rose 10 percent from a year earlier to a record 183 million tons in 2011, according to Bloomberg calculations from customs data. China gets about 70 percent of its energy by burning coal in power stations.

To contact Bloomberg News staff for this story: Chua Baizhen in Beijing at bchua14@bloomberg.net; Jing Yang in Shanghai at jyang251@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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