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China's official composite output PMI - covering manufacturing
and non-manufacturing sectors - grew by 2.6 points from the
previous month to 51.7 in September, largely owing to the
non-manufacturing sector bouncing back, while factory activity
slowed on the back of wider curbs on electricity use and higher
input prices. The official manufacturing PMI declined by 0.5 points
to 49.6 in September.
Despite a decline in manufacturing PMI numbers, power generation
in Mainland China during September 2021 increased on strong demand
and stood at 675.1TWh (up 4.9 percent year-on-year (y/y)), with
generation from thermal at 452.1TWh (up 5.7 percent y/y), hydro at
140.9TWh (down 0.3 percent), nuclear at 33.2TWh (up 4.3 percent),
wind at 34.0TWh (up 19.7 percent), and solar at 14.8TWh (up 4.5
percent).
As per the National Bureau of Statistics, raw coal production in
Mainland China during September 2021 stood at 334.1mt (down 0.9
percent y/y). During 15-27 September, mining operations in Shaanxi
were reported to be suspended to prevent any mining accidents
during the 2021 National Games of China. This could have tightened
up domestic supplies during the month. Overall, coal production
during 9M21 stood at 2.9bn t (up 3.7 percent y/y). One of the major
coal miners - China Shenhua Energy has reported a commercial coal
production of 23.6mt (marginally higher y/y) for September 2021,
with total production during 9M21 at 224.2mt (up 3 percent y/y).
Shenhua's coal sales (including 3rd party) stood at 40.7mt (up 1
percent y/y) during the reported month, and during 9M21 at 361.6mt
(up 12 percent y/y). Broadly, Shenhua third party sales (combined
sales minus captive production) during September 2021 and 9M21
stood at 17.1mt (up 2 percent y/y) and 137.4mt (up 29 percent),
respectively.
As per the IHS Markit's Commodities at Sea,
total seaborne coal discharges at the China (Mainland) ports during
September 2021 stood at 23.7mt (up 71 percent y/y). In terms of
Chinese regions, coal discharges into North, East, and South China
ports stood at 3.5mt (down 24 percent y/y), 11.3mt (up 84 percent),
and 8.8mt (up 190 percent), respectively. And, in terms of cargo
grades, discharges of thermal and metallurgical coal stood at
21.2mt (up 118 percent y/y) and 2.5mt (down 39 percent),
respectively.
During the reported month, thermal coal cargo discharges into
China (Mainland) surged from Indonesia (17.3mt, up 301 percent
y/y), but also from smaller origins like the Philippines (0.8mt, up
231 percent), Colombia (0.4mt, up from 32kt the last year), as well
as South Africa with cargo volumes of 0.2mt compared to nil
shipments a year ago. On the other hand, shipments from Russia saw
a decline (2.4mt, down 4 percent), and no discharges was observed
from Australia (versus 2.5mt a year ago). Mainland China buyers
have been hoovering up Indonesia's excess thermal coal as a
replacement for Australian material due to Beijing's ongoing trade
embargo.
In terms of metallurgical coal, during September 2021,
discharges increased from Canada (0.8mt, up 234 percent y/y), the
USA (1.0mt, up 669 percent). While metallurgical coal shipments
decreased from Russia (0.6mt, down 3 percent); and no shipments
from Australia (versus 3.0mt the previous year), Colombia (versus
0.1mt the previous year), and Ukraine (versus 27kt the previous
year).
During the reported month, an increase in thermal coal shipments
has been observed across all vessel segments except Capesize
(1.1mt, down 33 percent y/y). For the rest of the vessel sizes,
Mini Capesize (0.7mt, up 228 percent), Post Panamax (1.4mt, up 111
percent), Kamsarmax (2.2mt, up 317 percent), Panamax (9.6mt up 159
percent), Ultramax (1.0mt, up 240 percent), and Supramax (3.8mt, up
121 percent). For metallurgical coal, shipments increased on
Capesize (0.6mt, up 5 percent y/y); while declined on Mini Capesize
(0.1mt, down 55 percent), Post Panamax (0.6mt, down 60 percent),
Kamsarmax (0.4mt, down 34 percent), Panamax (0.5mt, down 24
percent), Ultramax (63kt, down 58 percent), and Supramax (50kt,
down 74 percent).
As per IHS Markit's Commodities at Sea
Coal Port Stocks, Caofeidian Basin 1 Coal Terminal Phase 3
stockpile as of 7 October 2021 stood at 1,073kt (up 19 percent
m/m), Huaneng Coal Terminal as of 7 October 2021 stood at 1,490kt
(up 61 percent m/m), SDIC Caofeidian Port as of 11 October 2021 at
3,005kt (improved from the 2,168kt level recorded on 13 September
2021), and SDIC Caofeidian Port Phase 2 as of 7 October 2021 at
1,590kt (up 28 percent m/m).
At the Mainland China ports, congestion from coal vessels
arrivals has eased significantly in the last month. As per IHS Markit's Bulkers at Sea,
currently, there are 125 vessels (8.6mn dwt) laden with coal
waiting to be discharged at Mainland China's ports, compared to 149
vessels on week 38. In terms of load country/territory of the
bulkers currently waiting to be discharged - Indonesian cargoes
stood at 39 vessels (2.95mn dwt) and Russia at 11 vessels (0.9mn
dwt).
As per the Mongolian Customs General Administration, Mongolian
overland coal exports (which are mostly metallurgical) to China
(Mainland) during September 2021 stood at 0.95mt (down 4 percent
m/m, and down 78.7 percent y/y). During 9M2021, Mongolian coal
overland shipments stood at 11.38mt, down 40 percent y/y.
As per IHS Markit's Commodities at Sea,
during the first nine months of 2021, total seaborne coal discharge
at the China (Mainland) ports stood at 213.2mt (up 12 percent y/y).
In terms of the Chinese regions, coal discharges into North, East,
and South China stood at 32.6mt (down 24 percent y/y), 97.8mt (up
18 percent), and 82.8mt (up 30 percent), respectively. In terms of
cargo grade, thermal coal and metallurgical coal stood at 183.7mt
(up 28 percent y/y) and 29.6mt (down 37 percent), respectively.
During 9M21, thermal coal discharges into China (Mainland)
increased from Indonesia (143.1mt, up 66 percent y/y), Russia
(23.4mt, up 24 percent), Philippines (6.1mt, up 222 percent),
Colombia (3.4mt, up 143 percent), Canada (0.9mt, level y/y); while
shipments declined from Vietnam (0.6mt, down 8 percent). Discharges
have almost halted from Australia (0.8mt versus 32.9mt a year ago)
on the back of an informal ban since last year.
In terms of metallurgical coal, throughout the first nine months
of 2021, discharges significantly declined from Australia (3.6mt
versus 35.8mt a year ago). While discharges increased from Canada
(7.5mt, up 87 percent y/y), Russia (8.1mt, up 86 percent), the USA
(8.0mt, versus 1.1mt a year ago), Colombia (0.7mt, up 2 percent),
Latvia (0.2mt, up 95 percent), and Mozambique (0.8mt, versus 214kt
a year ago), but were not able to cover up for the loss of tonnage
from Australia.
In terms of vessel segments, during 9M21, total coal shipments
increased on Newcastlemax (0.7mt, up 286 percent y/y), Mini
Capesize (6.7mt, up 76 percent), Kamsarmax (17.8mt, up 8 percent),
Panamax (82.2mt, up 43 percent), Ultramax (10.0mt, up 69 percent),
and Supramax (36.7mt, up 37 percent); while coal shipments declined
on Capesize (21.6mt, down 42 percent y/y), and Post Panamax
(19.4mt, down 25 percent).
Short-Medium term outlook
Mainland China's total seaborne coal imports during October 2021
are forecast at 26.6mt, with thermal and metallurgical coal at
22.7mt and 3.9mt, respectively. For 4Q 2021 and full 2021, Chinese
seaborne coal imports are forecast at 76.8/290mt (Thermal
~66.1/250mt and Metallurgical ~10.7/40mt), respectively. Daqin line
is scheduled to undergo maintenance in October which could pose a
domestic coal supply-side risk for 4Q21. Anticipating coal shortage
to be prevalent during 4Q, North Asia LNG prices are receiving a
boost but could also be due to coal to gas switching in an attempt
by Beijing to have Blue Skies as the country is hosting winter
Olympics in February 2022. China's total coal imports (seaborne and
overland) in 2021 are forecast at 310-320mt, with 20-30mt overland
from Mongolia and Russia.
