Oversupply threatens China's big ports

MAJOR Chinese coal ports including Qinhuangdao, Tangshan and Huanghua are approaching their capacity limits as rising stockpiles reflect the impact of an overall slowdown on the country’s energy sector.
Oversupply threatens China's big ports Oversupply threatens China's big ports Oversupply threatens China's big ports Oversupply threatens China's big ports Oversupply threatens China's big ports

Photo: Parker Hannifin

Justin Niessner

As the largest coal loading port in the world, Qinhuangdao accounts for half of China’s coal needs and functions as a clear barometer of the state of the domestic market.

Coal inventory at the port reportedly totalled 9.1Mt by June 25, just shy of the terminal’s designed volume of 10.2Mt.

According to official state media outlet Xinhua, coal supplies among the three ports together reached 18.3Mt by less than a week later.

Coal piles at the Hebei province facilities as of the end of June reached 8.6Mt for Qinhuangdao, 8.4Mt for Tangshan and 1.3Mt for Huanghua, where two new berths became operational in February.

The China Coal Transportation and Distribution Association said the nation’s coal stocks were estimated at about 300Mt, equivalent to a month’s worth of consumption for the entire country.

An economic slowdown and a surge in imports during the first four months of 2012 have affected the domestic coal market through oversupply downstream and softened prices.

Last month, the CCTDA said the price of 5500 kilocalorie thermal coal at Qinhuangdao dropped 2.7% to $US114 per tonne – the biggest fall since March 2010.

Although power consumption in China increased 5.8% year-on-year over the first five months of 2012, a 6.2% drop in the growth rate over the same period has kept domestic demand suppressed.

As Chinese traders scramble to find north Asian customers for the surplus, thermal coal consumers are defaulting on their contracts with producers to take advantage of the falling prices.

Xinhua noted that as the stockpiles rise, “coal industry associations at all levels” were urging relevant industry sectors to reach a consensus and curb a trend toward vicious competition.

However, no concrete action to cope with the problem has yet been taken.

China is both the world’s largest consumer and producer of coal, having tripled its domestic production between 2000 and 2010.

The country uses coal for 77% of its primary energy production and 80% of its electricity production.