China coal short-term outlook January 2023 Report

Commodity Market Report 06 February 2023

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Report summary

The coronavirus pandemic affected China’s economy again in December. However, the recovery of some key economic indicators – domestic consumption, manufacturing PMI, and others – shows that the economy is recuperating. Far from boosting the economy though, coal prices fell because of record-high coal inventory at ports at the end of January. We expect the high stock levels will persist in dragging the price down in February. The reviving economy will be the first driver of coal prices in the coming months. Price weaknesses also emerged in the coking coal market, as companies completed their restocking and the transactions were scarce. High expectations for the recovery of steel demand encouraged steel mills to maintain high operating rates. We expect the high operating rates to support the coke and coking coal prices in February before real demand is tested after March.

Thermal demand: economic activity is recuperating from the coronavirus pandemic
Met demand: high hopes for steel demand-supported price recovery; yet, questionable
Coal production in 2022 hit a record high of 4.5 Bt
2023 supply will reach another high
Thermal imports: China imported 208 Mt of seaborne thermal coal in 2022
Met imports: the arrival of Australian cargoes will reshape import shares but will be limited in 2023
Thermal price: record high coal inventory led to a price fall at the end of January
Strong expectations of increasing coal demand in 2023 cannot stop the coal price from falling
Met price: post-holiday buying interest to reverse the short-lived price decline