China Clean-Air Policies Seen by Deutsche Cutting Coal Trade 18%

Global shipments of thermal coal could be 18 percent lower than forecasted by 2015 should China, the biggest importer, toughen measures to curb air pollution to safe levels, Deutsche Bank AG said.

Seaborne trade in the power-station fuel will shrink to 790 million metric tons, about the same as 2010, in a scenario where China increases resource taxes and introduces other levies to curb carbon emissions, Michael Lewis, Deutsche Bank’s head of commodities research, said in a March 1 report. Without such measures, shipments will be 960 million tons, he said.

“The potential revisions to coal demand as a result of a higher resource tax and levies on carbon and other emissions would likely reduce coal import demand markedly, and possibly even return China to the status of net exporter, which last occurred in 2008,” according to the report.

China accounts for 19 percent of all seaborne thermal coal demand as well as being the biggest producer, mining 3.6 billion tons, or 45 percent of the world total in 2012, Deutsche Bank said. Imports represented 5 percent of its needs. Cleaner fuels represented 13 percent of China’s energy consumption in 2010-11, compared with 42 percent in Organisation for Economic Co-operation and Development Countries, according to the bank.

Australian mines’ production costs are among the highest globally and they would be most hurt by the reduced demand because they supply 30 percent of China’s imports, the bank said. Benchmark prices at Newcastle, on the country’s East Coast, would need to fall to at least $87 per ton to force 43 million tons of export output offline, according to Deutsche Bank.

Indonesia, which ships 45 percent of China’s coal, may be able to find alternative buyers, including India, the bank said.

If China’s government takes no action to address the country’s pollution crisis, thermal coal imports will decline to 170 million tons in 2014 from 175 million this year, shrinking to 160 million in 2015, the bank estimated.

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