January 24, 2022 - China’s metallurgical coal prices are expected to remain bearish in 2022, with demand falling 2.9% below 2021 levels, industry sources said.

Guangdong-based Hongyuan Futures said China’s 2022 average met coal prices are expected to dip below Yuan 2,000/mt ($314/mt).

In the early part of 2022, prices will likely remain soft mainly because of the Winter Olympics that starts in February, while prices will continue to be volatile ahead of two important national meetings occurring in the year, according to Hongyuan Futures.

China will hold its most important event of the year, the 20th National Congress, in November, but the National People’s Congress will meet in March to discuss progress on key themes, including national economic development.

Price volatility is likely throughout the year amid fluctuating demand from the infrastructure sector, which could be impacted by the steel industry’s production cap measures, according to Hongyuan Futures.

Guotai Junan Futures sees 2022 domestic coking coal futures prices moving in the range of Yuan 1,200-2,200/mt, and added that met coal demand would not rise much in 2022 on a potential output cap in China’s crude steel sector.

The lower demand forecast is based on China Iron & Steel Industry Association’s expectations of a 2.2% year-on-year dip in 2022 crude steel output, reaching 1.017 billion mt, and the resulting 4.5% year-on-year fall in 2022 pig iron output to 824 million mt.

China’s coking sector is forecast to consume around 560 million mt of met coal in 2022, which translates to 1.01 billion mt raw coal, down 2.9% from 2021, data by Hongyuan showed.

China’s met coal output could reach 489 million mt in 2022, steady from 2021 levels, latest estimates by investment bank China International Capital Corp., or CICC, showed.

For 2022, other industry analysts also see limited growth in domestic met coal production on possible output cap during H2 2022.

Hunan-based Goldtrust Futures said it expects China’s met coal output to be around 500 million mt in 2022.

Trade

Despite China’s large met coal production, it has depended on imports to meet its vast industrial needs. The country relies heavily on coal from Australia, but an unofficial ban on Australian coal in December 2020 constricted China’s coal source pipeline.

However, China gave port clearance for stranded Australian coal in October to tackle tight domestic supplies.

In November, Australia was China’s biggest met coal exporter, with inflows to China more than tripling from October to 2.67 million mt, China’s customs data showed.

Overall, China imported 7.74 million mt of met coal in November, up 76.59% from October, and more than double on the year, according to customs data.

China imported 47.2095 million mt met coal in the first 11 months of 2021, down 31.57% on the year, customs data showed.

CICC forecasts China’s net met coal imports to reach 58 million mt in 2022, up 21%, on the year.

Domestic Stock Levels

China is expected to see an improved met coal surplus of 2 million mt in 2022, against a deficit of 7.6 million mt in 2021, CICC data showed.

CICC forecasts China’s met coal stocks to reach 12.8 million mt by end 2022, up from estimated stocks of 10.8 million mt at end 2021.

According to China Construction Bank’s research arm CCB Futures, China’s coking sector’s met coal stocks fell from 19.42 million mt in January to 10.129 million mt in the second half of November.

Met coal stocks at domestic ports were at around 4.2 million mt in end November while coal mines’ met coal stocks in October rose to 2.89 million mt, indicating waning met coal demand from the coking sector, according to CCB.