|
China has continued its role as one of the main drivers of coal demand—a situation replicated in the oil, metals and other commodity markets—as the country seeks to increase its electricity and steel production. According to the National Development and Reform Commission, China accounted for 26% of the world output of steel and 47% of cement production in 2005, while Chinese crude steel production for the January to September 2006 period has also increased 18.4% on year to 308.44 million mt. Chinese electricity generation is 70% coal-fired.
Chinese imports of thermal and metallurgical coal continued to hit new highs, despite rising domestic inventory levels. The economy bureau and policy research center for the Chinese Communist Party's Central Committee said China's domestic consumption of coal in 2006 is expected to be 2.17 billion mt, up a relatively modest 110 million mt (or 5%) from the previous year. Chinese coal stocks reached 152 million mt by the end of June 2006, 31.77 million mt higher than in June 2005 and the highest inventory on record since 1999. Chinese export prices increased in 2006 after the Chinese government removed the Value Added Tax rebate of 8% on coal exports. Chinese thermal coal export prices climbed to around the $55/mt FOB Qinhuangdao in October, while Chinese export coking coal prices hit the $85-90/mt level. As Chinese producers continue to tap the export markets to supplement domestic sales, prices are seen likely to remain firm heading into 2007. |
