China's environmental policy hits coking coal supply
Published by MAC on 2010-11-01Source: Interfax China
The Chinese regime has been eliminating millions of tonnes of domestic coking coal production.
While there are sound economic reasons for taking this step - the coal is piling up and demand hasn't increased - there's little doubt that the administration is also evincing environmental concerns.
According to CIFCO - a leading Chinese brokerage: "Each ton of coke... produced requires the consumption of two tons of coal as raw material. Additionally, coke production generates vast amounts of poisonous gases and waste water."
Already the amount of such coal exports has dropped to virtually nothing (only half a million tonnes being exported in 2009).
Coking coal (aka metallurgical coal) is used in the manufacture of steel, as distinct from thermal coal, destined primarily for electricity generation.
Supply surplus and environmental concerns cast shadow over China's coke sector
Interfax China Metals and Mining
16 October 2010
As China's coke industry faces a serious oversupply, its future is likely to remain gloomy as domestic environmental concerns and international pressure to cut carbon emissions continue to increase, industry experts told Interfax.
China's coke production capacity skyrocketed during the 1980s and in 1991, the country became the world's largest coke producer. In 2000, the country took up over 60 percent of the world's coke production to become the world's largest coke exporter at that time.
However, despite having a current annual coke production capacity of over 400 million tons, China's annual demand stands at around 300 million tons, according to the latest industry estimates.
In response, the central government drafted a plan to eliminate 80 million tons of excessive production capacity from 2006 to 2010.
Part of the policy's aim is to reduce the environmental impact of coke production, which generates around 400 cubic meters of coal gas emissions for each ton that is produced.
According to the Ministry of Industry and Information Technology (MIIT), China eliminated over 18 million tons of excessive coke production capacity in 2009. For 2010, the MIIT has required 192 domestic coke producers to eliminate 26 million tons of outdated production capacity.
"The government's policies have put a lot of pressure on the coke industry," Mysteel analyst Nie Haisheng told Interfax. "As such, a large number of domestic coke producers have reduced or even halted production altogether. We will most likely see this trend continue until the beginning of 2011."
Meanwhile, the external demand, which had been an important means of absorbing some of the country's coke production capacity prior to 2004, is unlikely to significantly increase in the near future, industry experts forecast.
In 2004, the central government began imposing restrictions on coke exports due to a supply overcapacity, high energy consumption and high levels of pollution. After the central government raised the coke export tariff from 15 percent to 40 percent in 2008, the country's coke exports dropped by 95.54 percent year-on-year to just 0.54 million tons in 2009.
According to a CIFCO Futures research report published in late September, China needs to seriously consider its coke export policy from an environmental standpoint. "Each ton of coke that is produced requires the consumption of two tons of coal as raw material. Additionally, coke production generates vast amounts of poisonous gases and waste water," the report noted. CIFCO forecast that central government economic regulators are unlikely to change coke export policies in the short-term.
Nie Haisheng told Interfax that even if the government lowers the coke export tariff, it would still not help domestic coke producers very much.
"International demand for coke from downstream steel mills is currently pretty weak. Additionally, domestic steel makers are facing pressure from the government to reduce energy consumption," Nie said.