Source: China Coal Market Summit Forum 2005
The production and consumption of coal in P.R.C. have been increased dramatically since year 2000. The following charts illustrate actual figures and the growth:
Source: China Summit Forum 2005
At current stage, there is a supply shortage of coal as 5,000 tons per year. The whole market still appears to be dominated by demand side. From 2010-2020, the coal supply for whole P.R.C. would incur 1.3 billion tons of shortage.
At present, the existence of small-scale enterprises in China results in a fragmented market. Due to the frequent coal mine accidents, Chinese government posted series of regulations to consolidate the coal industry. These regulations called for the closure of small coal mines that lack mining right permits or have poor safety records. As a result of these regulations, only a number of qualified coal mines are allowed to operate in China. That led a less intensive market competition and a bigger space for profit. According to statistics, small-scaled coal mines share a total of 76.8% of the overall market. Coke
Coke is the main raw material for metallurgic and steel refining industry and it is expected that there will be no substitute for coke in the next 20 to 30 years. With the increasing demand for steel from infrastructure and manufacturing sectors in developed and developing countries, there is an increasing demand for steel and hence coke. On the other hand, coke production capacity decreases gradually. The aging of worldwide coke production facilities, strengthening in environmental protection regulation in developed countries and the limited supply of coking coal (major raw material for coke production) have reduced the production capacity of coke.
Pricing
Starting from the second half last year, the price of coking coal has dropped from the high end to a relative stable price as RMB 500 per ton. The following chart shows the price trend for the most recent year.
Source: sxcoal.com
Market Drivers
Three key drivers lead to increase in coking coal and coke demand in China:
- Growth in global demand for steel driven by growth in consumer spending and industrial capacities investment
- Increased by 8.8% in current year
- Expect to increase by 6.0% continuously
- Increase export from China manufacturers and drive the growth in coke consumption
- Growth in steel demand in China
- Fast growing economy
- Increase in manufacturing activities and heavy industry in China
- Increase in the scale of automobile manufacturing activities in China
- 2008 Olympics and 2010 World Expo
- Changing government regulations in Coking industry
- The new pollution control policy encourages upgraded facilities and cost-effective production for coking industry
- More well established and newly developed facilities for production of coke in China resulted in increase in demand for coking coal and coke
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