China Thermal Coal Imports Will Drop

Chinese coal price war to dampen coal imports - Reuters | China's major coal producers have been slashing domestic prices since July to gain market share, in a move likely to slow import growth for the rest of the year as overseas shipments become less attractive in the top buyer and producer of the fuel. Local coal prices have already dropped 14% so far this year and could drop further . . . Although plans to increase infrastructure investment could also lift coal consumption, efforts to shut plants in sprawling power-intensive industries, such as cement, steel and aluminium, could also partly offset any demand growth, they said. "The industry is still in a phase where major producers are cutting costs to displace marginal producers and that will keep driving down coal prices," Laban Yu, an analyst at investment bank Jefferies, said in a note this week. "The market is calling a bottom. We are not," Yu said. Jefferies says prices will not hit bottom for another year. . . .China's spot coal prices have dropped 9.3% since June to hit a four-year low of 546 yuan ($89.19) this week, even though a record hot summer pushed July power consumption growth to its highest this year. About 10% of China's thermal coal producers have a break-even cost of around 500 yuan a tonne, analysts said, giving major miners plenty of room to keep cutting prices. . . .But with inventories of around 300-million tonnes piled up across the country, about 11% higher than a year ago, analysts at Japanese investment bank Nomura have said China's output needs to fall 8% to 10% to restore market balance

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