(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, Dec 14 (Reuters) - A sure sign that
China is struggling with its planned switch to natural gas from
coal for winter heating is the spot price of Australian coal
climbing back above $100 a tonne.
Spot cargoes of thermal coal from Australia's Newcastle port
, an Asian benchmark for the fuel used mainly in
power plants, rose to $100.65 a tonne on Wednesday, breaching
the triple-figure barrier for the first time since Nov. 1 and
hitting their highest since mid-September.
The price is also 9.2 percent higher than a recent low of
$92.20 touched on Nov. 23 as the market responds to signs that
Beijing is relaxing its anti-coal stance due to the scarcity of
natural gas and the sharply higher prices for the
cleaner-burning fuel that is available.
The price of domestic coal in China is also rising, with
consultancy Steelhome assessing thermal coal at Qinhuangdao
<SH-QHA-TRMCOAL> at 620 yuan ($93.65) a tonne on Dec. 13, up
slightly from 615 yuan at the start of December, but 9.7 percent
higher than levels that prevailed in the middle of this year.
The news is certainly bullish for coal, at least in the
short term, as restrictions on its use are eased in the face of
the natural gas crunch.
Chinese media reported on Dec. 11 that a coal-fired power
plant in the capital Beijing will be restarted, the latest step
in a series of measures allowing more coal to be burned.
The authorities had planned to cut coal consumption over
winter, especially in northern China, to lower air pollution
that has choked cities in previous years.
The measures have certainly boosted natural gas demand, with
China importing a record 6.55 million tonnes in November via
pipeline and seaborne liquefied natural gas (LNG).
China's strong LNG demand, which was up 48 percent in the
first 10 months of the year, has helped drive Asian spot prices
<LNG-AS> to $10.10 per million British thermal units (mmBtu) for
the week ended Dec. 7, exceeding the peak of $9.75 hit the
previous winter and the highest in just over three years.
While natural gas imports have been roaring ahead, the same
cannot be said for coal, with November's 22.05 million tonnes
barely up from October's 21.28 million, and both sharply lower
than September's 27.08 million.
Vessel-tracking data compiled by Thomson Reuters also isn't
pointing to a robust December for China's seaborne coal imports,
with 4.6 million tonnes discharged in the first 13 days of the
month, indicative of total arrivals of 14.7 million tonnes.
The total is likely to rise as more cargoes leave for China
from major exporters Indonesia and Australia, but even so, the
vessel-tracking still isn't showing a surge in coal imports.
This may change for the latter months of winter in January
and February, but so far the rally in spot Australian thermal
coal prices appears to be driven more by sentiment than an
actual surge in demand.
COAL'S LAST HURRAH?
Another point to consider is what will happen in the 2018/19
It's hard to see the Chinese authorities backing down from
their push to natural gas. It's more likely they will learn from
this year's difficulties and spend much of 2018 building
suitable infrastructure to distribute and store natural gas.
It seems equally likely China's appetite for LNG will
continue to rise, and perhaps demand will start to rise earlier
in the year, assuming the ability to build inventories of
natural gas has been put in place.
The outlook for thermal coal imports is more murky, and will
largely depend on a combination of the domestic price, regional
dynamics within China and policy prescriptions.
(Editing by Tom Hogue)
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