A major question for 2017 is: will the coal rally continue?
Two events this week should lend strength to that market. With one consuming nation seeing a massive and unexpected leap in demand — while another coal-producing country saw major restrictions placed on its exports.
The importer is Vietnam. Which had an unprecedented surge in imports during the past year, according to data released this week.
Stats from Vietnam’s General Customs Department showed that coal shipments into the country jumped to 13 million tonnes, as of December 15. A mark that was more than four times greater than projections — which had pegged likely 2016 imports at just 3 million tonnes for the year.
So why did imports take such an unexpected leap? Apparently because of rising costs in Vietnam’s domestic coal mining sector.
Sources noted that Vietnamese buyers have been favoring imports of coal over the past year. With incoming shipments being cheaper than local supply — due to high mining costs at Vietnamese operations, and a 12 to 14 percent tax imposed on domestic coal.
Prices for local coal were therefore said to be up to 50 percent higher than for similar coal produced in other big mining nations like China.
That’s good news for international producers — potentially meaning that Vietnam could become a significant buyer of Australian and South African coal this year.
And sellers in those countries got another boost this week. From the United Nations. Related: Why Russia Expects $40 Oil This Year
The UN Security Council took aim at the coal mining sector in North Korea this past week. Imposing new sanctions on the sector after a North Korean nuclear test.
Those new measures limit the amount of coal North Korea can export to China — to just 7.5 million tonnes annually.
That’s significantly below Chinese current buying from North Korean miners — with China having imported 18.5 million tonnes of North Korea coal in the first 10 months of 2016. And will leave Chinese buyers scrambling to fill the gap, most likely using imports from go-to Asia supplying nations like Australia.
Add 10-ish millions of tonnes new demand in Vietnam to 10-ish million tonnes in North Korea-less China and it could be enough to move prices.
Watch for continuing numbers on imports into both countries.
Here’s to the unexpected,
By Dave Forest
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