Coal Rally Ending as China Shuns Imports, Opens Mines


"China's purchases will plunge 33% between June 30 and Dec. 31. . ."

China's unprecedented appetite for imported coal is about to be sated, jeopardizing a five-month rally in prices by adding to a global surplus of the fuel used in power plants from Perth to Chicago.

After importing a record 48 million tons in the first six months, China is opening mines idled by worker deaths this year following safety upgrades in a bid to bolster economic growth. Huadian Power International Corp. expects China's largest coal-mining province, Shanxi, to boost output by 60% in the second half of the year. That would mean an increase of 150 million metric tons, almost twice what Germany burns annually.

With little need to buy coal outside the country, prices may tumble, falling as much as 7% in Europe alone, Barclays Capital says. China's purchases will plunge 33% between June 30 and Dec. 31, based on the median estimate of four analysts surveyed by Bloomberg.

"In the first half, China really supported the market and put a pretty firm floor under the thermal-coal price because it was sucking in so many imports," said Andrew Harrington, an analyst at Patersons Securities Ltd. in Sydney. "It's difficult to be confident that it will continue at such a rate."

China's July coal imports fell 13% to 13.9 million tons from 16 million tons in June, a record high, customs data show today. Demand from China, which uses coal to generate about 80% of its electricity, helped ease a global supply glut that sent U.S. inventories to an 18-year high.

Chinese provinces are accelerating the expansion of coal mines, the China Coal Transport and Distribution Association said in a statement on its Web site today. The reopening of small mines in regions including Shanxi will increase supplies and put pressure on prices.

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