Regional Coal: China's coal export predicted to fall

China, the world's third-biggest coal exporter, may cut shipments 31 percent this year as buyers delay purchases on the expectation prices are poised to continue declines, the nation's biggest trader of the fuel said as quoted by Bloomberg.

Exports may total 60 million metric tons, less than the 80 million tons authorized by the government, Pan Wanze, deputy managing director of China Coal Import & Export Co., said in an interview in Beijing. China exported 86.7 million tons last year, according to the nation's customs office.

China's coal shipments are falling as supplies increase from Australia, Indonesia and South Africa, prompting a 23 percent decline in benchmark Newcastle spot prices since early July. Exporters including BHP Billiton, Anglo American Plc and PT Bumi Resources will get lower prices under annual contracts in 2006, ending two years of records, Pan said.

``Overseas buyers are slow in honoring contracts signed earlier, switching to the spot market,'' Pan said at the 2006 China Coal Market Summit conference Nov. 2. ``Prices right now are on a downward trend.''

Exports from China, the world's largest producer and consumer of coal, are poised to fall for a second year from 2003's record 93.9 million tons of the fuel. The government set the limit on exports at 80 million tons in 2004 and 2005, seeking to ensure domestic supply.

China's exports fell 17 percent in the first nine months of this year to 54.5 million tons, Pan said. The government in May lowered the rebate on a coal export tax, cutting the rebate to 8 percent from 11 percent.

``The tax rebate cut is an additional discouraging factor,'' Pan said. ``We're not optimistic the quota can be fully utilized given the price volatility these days.''

The globalCOAL index for coal delivered from Australia's Newcastle port, the world's largest coal-export harbor, fell 0.2 percent in the week ended Oct. 28 to $40.08 a ton. The index reached $51.99 in the week ending July 1.

Formal negotiations on pricing terms of next year's contracts with China's overseas buyers won't start until February, Pan said, and will last through the end of March.

Pan, who declined to predict China's coal export prices, said Australia's coal shipment customers in Japan and South Korea may pay $45 or $46 a ton next year, excluding freight charges.

Based on that forecast, export prices from China to North Asian countries, assuming freight charges of about $5 a ton may reach about $50 next year. That's lower than the $57 South Korean buyers paid in 2005 and the $59 paid by Japanese customers for Chinese coal.

The nation's coal export quota for 2006 may be little changed from this year's, and there is unlikely to be any alteration to the export tax rebate, Pan said.

At the same time, the China Coking Industry Association is seeking government support for a reduction in 2006 export quotas for coke, used in steelmaking, to stem a drop in international prices and keep domestic prices stable.

The association wants an export quota of about 10 million metric tons next year, compared with 2004's exports of 15 million tons, Huang Jingan, the association's general director, said in Beijing on Nov. 2.(*)