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REFILE--China's steps to fight rampant pollution hits Asian coal demand

Published 21/12/2016, 04:28 pm
© Reuters.  REFILE--China's steps to fight rampant pollution hits Asian coal demand
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* China orders closure of coal power stations, factories

* Authorities even order Tianjin port to stop handling coal

* North Asia weather outlook for December is relatively mild

* Import arbitrage into China has closed - Marex Spectron

By Henning Gloystein

SINGAPORE, Dec 21 (Reuters) - Asian thermal coal prices are set to come under pressure as a mild December in the Northern Hemisphere caps heating demand and China shuts power stations, factories, and even ports in a desperate fight against rampant smog.

Coal markets had some of the steepest price rises on record earlier this year, with Australian Newcastle cargo prices GCLNWCPFBMc1 gaining almost two-thirds within two months to over $114 per tonne by the start of November after Chinese authorities capped domestic coal mining, sending utilities scrambling for imports. prices started falling from mid-November after China's mining caps were loosened and an early winter cold snap eased.

Now, traders say coal could come under more pressure despite the start of the peak demand winter months.

"Import arbitrage on the Chinese market has closed which removes one of the last bright spots in coal demand in the Pacific," said Georgi Slavov, head of energy, iron ore and shipping research at commodities brokerage Marex Spectron.

Seaborne coal arbitrage into China, the world's biggest consumer of coal, is possible when China's domestic prices are higher than overseas prices.

Chinese spot coal prices CRFRMc1 are around $77 per tonne, down from $100 in early November, versus $91 for Australian coal, excluding freight costs.

China's coal demand has slowed as authorities have taken steps to reduce the rampant air pollution that has gripped the country this month. have included closing or curtailing output at coal-fired power stations and hundreds of factories. Authorities even ordered Tianjin port to stop handling coal and iron ore, creating a traffic jam of dozens of dry-bulk ships waiting to unload. are some of the most drastic steps ever by the government to reduce pollution, and it's bound to reduce coal consumption by power stations and imports into China's harbours," said one coal shipper.

While China's coal consumption could rise again once the smog abides, much will depend on winter weather.

Meteorological data in Thomson Reuters Eikon shows that the rest of December is expected to be unusually mild in most of Asia's Northern Hemisphere, while temperatures in January are expected to be around the seasonal norm.

"Judging just by the weather outlook, I wouldn't expect a jump in North Asian coal demand," the coal shipper said.

While China's coal imports could stutter, its purchases of liquefied natural gas hit a record 2.66 million tonnes in November, customs data showed on Wednesday. coal is still the most important fuel for power generation in China despite government efforts to increase the use of cleaner-burning natural gas.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ CHART-Australian vs China thermal coal prices

http://tmsnrt.rs/2hTcP06 TAKE A LOOK-Coal comes out of years of pain as 2016's hottest commodity

MAP-Dry-bulk ships waiting to unload at Tianjin port

http://tmsnrt.rs/2hTlEHj Interactive Map:

reuters://REALTIME/verb=Interactive%20Map/context=%3CNavigation%3E%3CEntities%3E%3CEntity%3E%3CInteractiveMap%20version=%221%22%3E%3CMap%3E%3CMapTargetZoom%3E9%3C/MapTargetZoom%3E%3CMapTargetCenter%20X=%22117.96432495%22%20Y=%2238.91133882%22%20/%3E%3CMapMode%3E2%3C/MapMode%3E%3CWrapAround%3ETrue%3C/WrapAround%3E%3CLayers%3E%3CLayer%20Type=%22UserList%22%3E%3CSelection%3E%3CRIC%3EC%7DTS7309533272%3C/RIC%3E%3C/Selection%3E%3CIdentifiers%3E%0D%0A%20%20%3CIdentifier%20namespace=%22RIC%22%20Selected=%22%22%3EC%7DTS7309533272%3C/Identifier%3E%0D%0A%3C/Identifiers%3E%3C/Layer%3E%3CLayer%20Type=%22PortAnalyzer%22%3E%3CSelection%3E%3CRIC%3EC%7DTS7309533272%3C/RIC%3E%3C/Selection%3E%3CDestinationPorts%3E%3CRIC%3EC%7DTS7309533272%3C/RIC%3E%3C/DestinationPorts%3E%3C/Layer%3E%3CLayer%20Type=%22BulkerVessels%22%20/%3E%3C/Layers%3E%3C/Map%3E%3C/InteractiveMap%3E%3C/Entity%3E%3C/Entities%3E%3C/Navigation%3E

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