Chinese utilities are expected to continue to build coal inventories amid strong power demand. However, they are increasingly turning into domestic sources as authorities limit these plants’ import quotas as an effort to support the local coal industry.
A government-backed power generator, which is also a major coal importer, has switched almost entirely to domestic suppliers as it has already run out of import quota for its plants in all coastal regions. It purchases domestic coal through long-term contracts and from the spot market. The company has imported 4-4.5 million tons of coal so far in 2020, close to its imports last year.
Another state-controlled power generator said it considered to purchase seven to eight more Panamax cargoes of domestic mid-calorific value (CV) coal cargoes once it uses up all of its import quotas. It usually imports Indonesian lignite and mixes it with local high-CV coal.
According to a state-run coal trader, Chinese utilities are mostly restocking with domestic coal as they run out of import quotas. The tightening in import quota is expected to support demand for domestic high-CV domestic coal, trading sources said.
