Coal Discount May Cut China Imports

Source:

"China right now looks to be more bearish than bullish."

China, which became a net coal importer in 2009, may cut overseas purchases after the discount on shipments from South Africa compared with domestic supplies narrowed 47% in a year.

The world's fastest-growing economy bought 126 million tons from overseas last year as demand from steelmakers and power producers soared, according to Chinese customs data. Now, power use is declining and the government has imposed price caps on local mines. China may require fewer shipments, threatening this year's 33% jump in spot prices at the port of Qinhuangdao.

The discount on coal from South Africa's Richards Bay, the world's second-biggest exporting harbor, and Chinese supplies has narrowed to $19 a ton before shipping costs are taken into account, government data show. That compares with $36 a ton less than a year ago.

"China right now looks to be more bearish than bullish," Richard Morse, who leads coal-market research at Stanford University at Stanford, California, said in an interview. "Lower domestic prices are bearish for imports."

Inventories carried by Chinese utilities rose to the equivalent of 18 days of consumption compared with seven days two months earlier, Australia and New Zealand Banking Group Ltd. said in an e-mailed note.

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