THE China Coal Transport and Distribution Association has recommended that coal buyers in China reduce their purchases from overseas to prevent negative impacts on domestic suppliers, reports Bloomberg News.

Customs data shows that Asia's largest economy imported 182 million tons of coal in the first five months of the year, an increase of almost 90 per cent compared to the same period in 2022.

This surge in imports was driven by expectations of a hotter summer, Beijing's efforts to minimise power outages, and a decline in seaborne coal prices.

However, local coal miners have experienced a significant drop in profits, with a nearly 20 per cent decrease in the first five months compared to the previous year, according to data from the National Bureau of Statistics.

This situation could worsen in the coming months, particularly considering that Chinese coal prices reached their peak in early September last year during global energy shortages caused by Russia's invasion of Ukraine.

The China Coal Transport and Distribution Association expressed concerns about the growing impact on domestic coal miners. In a statement following an industry summit, they recommended that companies "control the scale and pace" of coal imports.

The association also noted that power plants, which have high coal inventories, have been turning down some volumes from local miners, indicating that overall supply may remain sufficient in the second half.

The price of coal at Newcastle, Australia, which serves as the benchmark for seaborne supplies, is currently about one-third of its value in early September.

Although Chinese coal prices have also fallen, the premium paid for seaborne fuel dropped to around US$13.50 per ton a month ago, making imports more attractive. The shipping time for coal to reach China can vary, taking up to a month depending on the origin.

The increase in coal imports is also influenced by geopolitical factors. China is obtaining more coal from Russia and has resumed purchasing from Australia following an easing of diplomatic tensions earlier this year.

While the demand for electricity generation is expected to rise due to sweltering temperatures, it may be partially offset by lower industrial consumption as the post-pandemic recovery continues to disappoint. Additionally, heavy rain in southern China is boosting hydro-electric output.

A private survey indicates that Chinese manufacturing activity expanded at a slower pace in June, with companies becoming more cautious about their production outlook.

President Xi Jinping's appointment of a long-serving technocrat as the Communist Party's top official in the central bank suggests that policymakers will avoid drastic shifts for now as the world's second-largest economy struggles to regain momentum.

China remains active as a natural gas importer despite the easing of the global energy crisis, signaling its continued interest in purchasing natural gas.