OREANDA-NEWS. April 27, 2015. Ever had a house guest who has outstayed their welcome? It could be a family member, old school friend or acquaintance who has taken up residence in your house for longer than expected. They said they would stay only for a few days, then a week goes by and you begin to get impatient and frustrated. Politeness and your good manners keep you from broaching the subject of their stay. What to do?

The analogy of the unwelcome house guest fits with the current market for imported thermal coal in China. When China opened its door to what would become prodigious amounts of imported thermal coal in 2008, the country’s appetite for carbon-based fuel had begun to outpace its domestic supplies. Guests were invited by China to sell cargoes of imported thermal coal to coastal power plants providing power to its economy, which at the time was expanding at a double-digit pace. Imports steadily grew in volume to reach 170 million mt of thermal coal in the 2013 year — most of this from Australia and Indonesia.

Then last year came signs that China’s economic growth was slowing, and its domestic coal industry entered a dramatic slump as output surpassed demand, sending prices for Chinese thermal coal into a tailspin. Imported thermal coal was no longer required in the quantities previously provided by Australia and Indonesia. Indeed, China had its own coal industry and the jobs of millions of coal miners to protect.

China’s import figures are stark for any Australian or Indonesian thermal coal shipper. In the month of February, which admittedly included the Lunar New Year holiday, China imported 4.72 million mt of bituminous thermal coal compared with 8.75 million mt in February 2014. February’s imports equate to 56.6 million mt on an annualized basis, compared with 111.6 million mt actually shipped to China in the 2014 year — a potential on-year decline of 49%. The party, therefore, appears to be mostly over for shipments of imported thermal coal for China. In case this had not dawned on some guests, the host country has been dropping some substantial hints over the past six months. These hints include: China putting a 6% tax on imports of thermal coal from Australia, Russia and South Africa (Indonesian imports are exempt under an existing free trade agreement); introducing a testing regime at Chinese ports for trace chemical elements in coal such as chlorine and phosphorus; and restricting entry to some Chinese ports for cargoes with ash higher than 16%.

On top of this, Chinese thermal coal producers such as Shenhua have aggressively cut their prices to increase market share and to better compete with imports, and Beijing has instructed power companies to reduce their intake of fuel from the seaborne market.

As if all of these measures were not enough, at last week’s Coaltrans China coal industry conference in Beijing, two of China’s largest coal producers said they wanted to revive the export trade for Chinese thermal coal into Asia.

“We are trying to build our overseas customer base, and [our] exports are due to increase,” Shenhua Group Vice General Manager Wang Xiaolin told the conference.

“As to the increase of coal exports, we are studying this and we plan to increase the exports of coal,” said Datong Coal Mining Group Vice General Manager Jin Hua. China exported around 2.5 million mt of its thermal coal mostly to customers in Asia last year, and any sizeable growth in this trade would add to the region’s already oversupplied seaborne market.

For any remaining guests at China’s market for imported thermal coal, the message from Beijing seems to pretty clear: that for now, less imports are required. It’s time to pack one’s bags and head home.