Coal Age

JUL-AUG 2018

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Page 38 of 51

July/August 2018 37 met coal outlook continued Mechel, like other Russian miners, is still concentrating on catching up on stripping and development work, as well as equipment maintenance after multiple years of delayed capital expenditure. The result is a delay to forecast Russian pro- duction increases. Chinese Iron and Steel Going Strong In China, steel demand has held up well. While the property sector has been under some pressure due to restrictions on credit and tighter housing policies, data on prop- erty starts still showed healthy growth of 8% in April. There is some concern around the sustainability of the growth, given the very weak housing sales (+1%) and slow- ing completions (-10%), but year-to-date real estate investment has been positive, growing 10.3%, up from 7% last year. China's steel production statistics mir- rored the strong demand figures, with an- other very strong result in April, up 5.4% yoy. Hot metal production data also shows growth, but only 0.8% yoy, indicating a re- liance on scrap purchases, although some future revision to official data is possible. Metallurgical coal demand has re- mained robust. Firstly, the return to full production of some Chinese blast furnac- es after meeting their full quota of winter production cuts helped to propel demand for coke and coal. In addition to favorable iron production, coke makers have been incentivized to restock coking coal due to higher margins in recent weeks. Prices rose by RMB350/mt in May on the back of emis- sions-related coke production cuts in places such as Xuzhou city, Jiangsu. Mills in north and south China have been forced to source more coke from Shanxi, where coke makers have been operating at very high utilization rates. Some operations have been shorten- ing coking times to produce at higher rates. But Coal Imports Have Struggled While met coal use in China has been on the increase, seaborne imports into China have been lower-than-expected since the start of the year. There are three material reasons behind the sluggishness. Firstly, steel mills in southern China have increased domestic long-term con- tract volumes, under direction from the government. The extra commitment has resulted in reduced demand for imported coal, even when prices have been attractive. Secondly, while there has been a con- tinued shortage of premium HCCs in Chi- na, many northern mills have been able to increase land-borne deliveries from Mon- golia, which provides very low ash and low sulphur coals, that are competitively priced. Lifting of restrictions at Mongolia's border crossings have made the increased exports possible. Furthermore, customs clearance times have increased for Australian coals at Chinese ports. It now takes about 21 days for seaborne coking coal to pass the customs clearance in Tangshan, com- pared to 14 days previously. The delays don't help demand for imported coal. Some participants are blaming the chang- es on a deterioration in Australia-Chinese relations in recent weeks and months over attitudes towards the South China Sea. As a result of restrictions, WoodMac expect China's seaborne imports of met- allurgical coal to fall slightly in 2018 to 52 million mt, from 55 million mt last year. Overall, WoodMac expects China to register y-o-y growth in steel demand this year. Operating rates at blast furnaces should hold up between now and the fourth quarter, although they expect environmen- tal checks over the next few months to con- strain utilization below 2017 highs. There were many new steel plant starts recently in Asia. In Vietnam, Formosa Ha Tinh started a second blast furnace, increas- ing pig iron capacity by 3.5 million mt to 7 million mt. The expansion has the potential to add 1.7 million mtpy coking coal demand and 500,000 mtpy PCI. In Malaysia, Alliance Steel blew in a blast furnace at Kuantan in Pahang state. While Steel Authority of India (SAIL) successfully blew in the refurbished Rourkela No. 1 blast furnace. With increases in demand from Europe and India, WoodMac is projecting global seaborne metallurgical coal imports to grow by 5 million mt in 2018 to 304 million mt. This article was submitted by Wood Mack- enzie, a Verisk Analytics business and a trusted source of commercial intelligence for the world's natural resources sector. Wood- Mac provides objective analysis and advice on assets, companies and markets. For more information, visit Eriez' Suspended Magnets and Metal Detectors remove tramp metals before they reach your valuable crushers and downstream equipment. Double-Team Dangerous Tramp Metals! Download Catalogs & Product Selection Guides 814-835-6000 • Download Catalogs & Product Selection Guides B-45E-PB ERIEZ Quick Ship Equipment Catalog Q U I C K S H I P P R O G R A M ! Equipment Catalog ERIEZ Now Available in

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