China’s National Development and Reform Commission has announced that it plans to build up around 100 million tons of deployable coal reserves this year. It is extremely rare for the Chinese government to make statements on building up coal reserves, and this adds to our bullishness for the dry bulk shipping market and seaborne coal market. Precise details on the source of the reserves have not been released, but the National Development and Reform Commission has also stated it expects both domestic coal output and imports will increase in the near term. It is also rare for any Chinese government agency to publicly concede that coal imports will increase.
Overall, we remain bullish for China’s near-term coal import prospects and for the dry bulk shipping market. China’s power plant stockpiles are down year-on-year by about 25%, while coal-derived electricity production this quarter has been rising year-on-year by approximately 10%. At the same time, domestic coal production has stayed under government-mandated pressure (as accidents and deaths at coal mines have continued to occur in recent months). Coal port stockpiles in China have also now fallen to the lowest level since February, with last week’s decline marking the largest decline seen this year. Concerns for both summer and winter coal shortages have also continued to intensify in China, and we believe substantial strengthening in coal import demand will occur very soon.
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Source: By Jeffrey Landsberg, Managing Director, Commodore Research & Consultancy