By Kishori Krishnan Exclusive To Coal Investing News

The figures are daunting. Coal demand in the international market has been waning. International coal prices have been lingering at a low track from March to May. And statistics from China’s customs show that China’s imported coal in May reached 9.43 million tonnes surging by 133.1 per cent year on year, which is also the highest level ever.

From January to May, China’s combined imported coal volume was 32.2 million tonnes jumping 72.6 per cent year on year. In May, China exported 1.19 million tonnes of coal, plunging by 69.5 per cent year on year, also the lowest level since February 1998. The combined export volume in the first five months remained at 10.53 million tonnes declining by 43.1 per cent. From January to May, China’s net import volume of coal was 21.67 million tonnes compared with the 340,000 tonnes year on year.

The alarm bells have started ringing, though analysis and traders ascribe the fall to various reasons: the decline in demand in the international market, previously cheap international coal as well as high domestic coal price.

International demand has been shrinking, which is the fundamental reason for the surge of China’s coal imports since the year. Apart from China’s mainland, other regions worldwide have all witnessed crude steel production declining, causing the demand for coking coal to wane. Moreover, China’s domestic coal price has run high. In a bid to stave off the wolf at the door, China’s coal consumers have actively imported overseas resource.

Owing to the rapid increase of coal imports and rise of international crude oil, international coal price has experienced a round of recovery since late May. Till June 12, South Africa’s RB index, Australia’s NEWC index and Europe’s AR index had prevailed at US$64.78 per tonne, US$76.75 per tonne and US$71.06 per tonne respectively.

Compared with the average price of May, they each went up by US$6.85, US$12.51 and US$7.25 respectively. In the meantime, since late June coal price at China’s Qinhuangdao port dropped CNY 5 per tonne to CNY 10 per tonne.

Rays of recovery

But there are rays of hope elsewhere. Western Australia’s miners have recorded their fifth consecutive month of growth, a report by finance house Deloitte has reported. The result has driven up the WA Index by almost 6 per cent which equates to US$ 6.7 billion increase in shares worth.

Keith Jones, managing partner of Deloitte WA said that things were definitely heading in the right direction. “The Deloitte WA Index has climbed from a low of AUD 72.4 billion in November 2008 to AUD 118.6 billion at 30 June 2009. That’s a rise of AUD 46.2 billion or about 64 per cent.”

Jones added that equity funding was now flowing again, as global confidence in mining picked up and share prices were at more realistic levels.

Still on China, a cape cargo of high-ash, low volatile content Australian coal is being offered on the water at US$ 72.00 a tonne CIF South China, after the Chinese buyer cancelled the contract. “All we know is the Chinese buyer walked away,” one trader said. This is the first confirmation of a Chinese coal buyer cancelling a contract, traders said. There have been rumours for a week or so that Chinese buyers were trying to escape from contracts because of high stockpiles and slower end-user consumption in China.

Investments on

The Coal & Oil Group is planning to invest around $300 million to buy new ships and to acquire coal mines. The company is planning to invest the money to support its customer coal requirements in India and to meet its captive requirement for an upcoming project - the Rs 4,300 crore power project at Tuticorin.

Green brigade

And with a major part of the world yearning to go green, a body blow has been dealt to coal producers with the Intermountain Power Agency confirming that it would not continue efforts to seek an air permit for a third 900-megawatt coal-fired power unit at its plant in Utah, USA.

The Sierra Club said the once-proposed Unit 3 at the Intermountain power station 120 miles southwest of Salt Lake City is the 100th coal-fired power plant to be scuttled since 2002. Coal power plants are said to emit more carbon dioxide than any other source in the United States. CO2 accounts for more than 85 per cent of the world’s greenhouse gas emissions that cause global warming.

Officials have, however, admitted that electricity rates in Los Angeles are set to increase as a result of the new policy. Nationally, about half the electricity delivered comes from coal plants.

“More than 400 million tons of carbon dioxide pollution have been kept out of the air annually as a result of stopping these 100 plants,” said a Sierra Club statement issued Thursday. “It also demonstrates an undeniable trend of American communities moving beyond coal and toward clean, renewable energy,” said the environmental group.

The Los Angeles city-owned utility has said it will stop using coal-fired power by 2020, although its contract to buy 44.6 per cent of the power from the existing two units at Intermountain will not expire until the last day of 2026. About 40 per cent of the electricity now delivered by the LADWP is generated from burning coal, mainly at Intermountain and at the Navajo Generation Station in Arizona.