China’s July coal imports fell 23% from a year earlier, General Administration of Customs data showed on Thursday, as ample domestic supply limited import demand.

July coal imports were 35.61 million metric tons. While down from the year-earlier level, that represented a recovery from June’s more than two-year low as hotter weather spurred higher air conditioning demand, supporting electricity consumption.

Looking forward, the market is weighing whether China will take concrete steps to scale back production and curb domestic oversupply.

A National Energy Administration document dated July 20 called for inspections at coal mines in eight provinces, leading coking coal prices to rise by the trading limit in successive sessions on expectations that the inspections would lead to supply disruptions.

“Such a move by the NEA, if carried out, presents substantial upside risk to domestic coal prices given the potential for a reduction in local production,” LSEG coal analysts said in a note.

“This in turn poses upside risk to seaborne coal import prices because of the import price arbitrage dynamic, which is the primary determinant of China’s demand for imports.”

Analysts at data analytics firm Kpler said in a report that the NEA directive had only temporarily boosted prices and imports while the broader fundamentals pointed in the opposite direction.

The overall outlook remains bearish due to continued domestic output growth, rising renewables, and weakening steel demand.”

For the first seven months of the year, coal imports were down 13% at 257.3 million tons, the customs data showed.
Source: Reuters (Reporting by Colleen Howe; Editing by Christian Schmollinger)