METALLURGICAL COAL
Resource Reservations
June 2017
China’s metallurgical coal imports are expected to rise 10% in 2017 to 65Mt. In 2016, the country produced 1Bt of ROM metallurgical coal, mainly higher volatile semi-soft and semi-hard coking coals. Despite export prices rising sharply in 2016, China’s hard coking coal (HCC) ROM production was proportionally less than either its HCC coke mix requirements, or its HCC resources, indicating China is importing to conserve its own resources or obtain better quality and lower cost coal.

HCC Production Not Up to Strength

  • Chinese coal mines produced 1Bt ROM metallurgical coal in 2016, mainly from the central eastern provinces; however saleable product yield for Chinese metallurgical mines is typically 60%. Overall, China is able to meet 90% of its metallurgical coal demand from domestic production.
  • With gas coal and 1/3 coking (semi-soft (SSCC) and semi-hard (SHCC) coking coal, respectively) comprising half China’s domestic metallurgical coal production, the country can potentially achieve self-sufficiency in SSCC.
  • At the other end of the spectrum, 15% of Chinese ROM production was PCI and low volatile weaker coking coals in 2016. PCI production is supplemented by North Korean anthracite, and also Russian, Canadian and Australian PCI coals, especially since China imposed sanctions on North Korean imports.

 

 

China’s HCC Gap

  • In 2016, 21% of China’s domestic metallurgical coal production was low to mid volatile HCC, while the country’s typical blast furnace coking coal requirements are one third each of HCC, SHCC and SSCC, with PCI replacing a portion of the SSCC and SHCC depending on the injection rate of the furnace.
  • Chinese modern blast furnaces are ~60-65% of the size of Japanese or Korean furnaces, reflecting China’s preponderance of SSCC reserves. Korea and Japan, who import all their coal, have higher PCI injection rates and rely on hard coking coal with a coke strength of over 60% to form the mainstay of their coke mix.
  • As well as a deficit in premium low volatile hard coking coal, there is a lack of medium to high fluidity semi-hard to hard coking coal. China imports low to medium volatile hard coking coal from Australia and Canada and medium to high volatile hard coking coal from Australia and the US. AME expects that the closure of BMA’s Crinum mine in the Bowen Basin, Queensland, in 2015 exacerbated this and made the market more vulnerable to supply shortage in 2016.

 

 

Waxing Semi-soft, Waning Premium HCC and PCI Resources

  • Many Chinese domestic mines do not publish, and may not have defined, resources. Even fewer define and report reserves. Typically, 23% of measured resources are converted to reserves in Chinese mines.
  • Shanxi province produced 40% of China’s metallurgical coal production, but contains 77% of its current published measured resources of metallurgical coal, mainly gas coal and 1/3 coking (SSCC and SHCC).
  • Low to mid volatile HCC comprises 28% of the measured resources and PCI and similar low volatile weakly coking coals comprise 14%.
  • With almost half of China’s defined metallurgical coal resources SSCC, the country has a scarcity of higher fluidity semi-hard to hard coking and PCI resources.
  • The main metallurgical coal province of Shanxi is well explored, but further exploration in other provinces may define more metallurgical coal resources. These resources would be deeper and therefore more expensive to mine, and would have to compete with high quality, lower cost  imports.