The Zhitong Finance App learned that Open Source Securities released a research report saying that from January 1, China will resume coal import tariffs. Although the tariff rate for imported Australian and Indonesian coal is 0, tariffs will be imposed on imported coal from other countries, including Russia, the United States, South Africa, Mongolia, etc. From January to November 2023, China mainly imports thermal coal from Indonesia (61%), Russia (17%), and Australia (13%). Imported coking coal mainly comes from Mongolia (52%) and Russia (26%), so the resumption of import tariffs will have a greater impact on Russian coal and Mongolian coal. If domestic and foreign coal price differences gradually subside in 2024, the price advantage of imported coal weakens, this will lead to expectations that China's imported coal will decrease.

Open source securities views are as follows:

Coal imports hit a record high in a single month in December, and the restoration of coal import tariffs may be an important catalyst

In December 2023, China imported 47.297 million tons of coal and lignite, up 53.0% year on year and 8.7% month on month. After China's coal imports climbed to the third highest in the history of a single month in November, imports in December hit a record high in a single month. Due to weak overseas coal supply and demand and China's implementation of a zero-tariff coal policy, domestic coal imports increased and decreased in 2023. According to data from the General Administration of Customs, China imported a total of 474.416 million tons of coal and lignite from January to December 2023, a year-on-year increase of 61.8%. The amount of imported coal and lignite was 372.3 billion yuan. The average import cost of coal in 2023 was 785 yuan/ton, down 19.5% year on year. China will resume import tariffs on coal from January 1, 2024, and the cost of imported coal will increase. To a certain extent, it has catalyzed the demand for coal import traders to purchase coal ahead of schedule in November and December. Coal imports ended a month-on-month decline in September-October and achieved growth exceeding expectations.

The weak pattern of increase in overseas coal supply and demand in 2023 may be reversed in 2024. Imported coal is expected to decrease

From the supply side, according to the IEA's analysis of major overseas coal mine projects, the production capacity of new overseas coal mines was about 156.9 million tons in 2023, and is expected to drop to 3050, 7330, and 53.1 million tons; among China's main import sources from January to November 2023, Indonesia (accounting for 47%) actually produced 770 million tons of coal in 2023, and its target coal output for 2024 was only 710 million tons; Russia (accounting for 22%) already accounted for 53.3% of goods exported from January to November to the port, and was shipped to the Far East mouth The growth rate of coal in the direction of the direction is far lower than that of being shipped to the northwest port, making it difficult to export coal to China; Mongolia (accounting for 14%)'s current railway capacity is still the main bottleneck limiting the increase in volume. On the demand side, countries, mainly developed countries, may slow down the “decarburization” process to prevent the risk of short-term energy supply shortages, thereby supporting global demand for imported electricity and coal; in recent years, coal demand in emerging economies represented by India and Indonesia has been high. The Ministry of Coal of India predicts that from FY2022 to FY2029-30 (April 1 to March 31 of the following year), India's coal demand will rise from 1,029 million tons to 1,448 million tons. The Indonesian Ministry of Energy and Mineral Resources predicts that the power generation industry will consume 17—180 million tons of coal in 2024, higher than in 2023 At 161 million tons, manufacturing and other industrial users will consume 30 to 35 million tons of coal. Judging from this, the pattern of international coal supply growth in 2024 may be reversed compared to 2023. Demand increases due to unclear increases in overseas supply, which may lead to a decline in the amount of coal imported from China.

China resumes import tariffs on coal, weakening the price advantage of imported coal or reducing the amount of imported coal

One important reason for the high increase in the amount of coal imported by China in 2023 is the extension of China's zero-import tariff policy on coal. From January 1, 2024, China will resume import tariffs on coal. Although the tax rate for imported Australian and Indonesian coal is 0, tariffs will be levied on imported coal from other countries, including Russia, the United States, South Africa, Mongolia, etc. (Among them, the most-favoured-nation tax rate is 3% for anthracite, coking coal, and lignite, and 6% for other coals). From January to November 2023, China mainly imports thermal coal from Indonesia (61%), Russia (17%), and Australia (13%). Imported coking coal mainly comes from Mongolia (52%) and Russia (26%), so the resumption of import tariffs will have a greater impact on Russian coal and Mongolian coal. Based on the price of Russian 5,500K thermal coal to Suifenhe Port, Russian main coking coal to Jingtang Port, and Mongolian coking coal to Ganqimodu at the end of December 2023, the restoration of import tariffs will increase import costs by 44 yuan/ton, 68 yuan/ton, and 54 yuan/ton, respectively. If domestic and foreign coal price differences gradually subside in 2024, the price advantage of imported coal weakens, this will lead to expectations that China's imported coal will decrease.

Risk warning: Global coal supply exceeds expectations, demand falls short of expectations, coal import tariffs, etc.