July 3, 2022 - The number of trucks carrying metallurgical coal into China in June rose to the highest level in 2022, as COVID-19 movement restrictions eased in the country, industry sources said June 30.

Daily coal hauls to China reached the year's peak at about 820 trucks in the week started June 27, the latest data from investment bank Founder CIFCO showed.

Land border ports of Ganqimaodu and Mandura accounted for most of the truck traffic.

The number of trucks has more than doubled since May, when the daily Mongolian coal haul to China averaged 400 trucks, CIFCO's data showed.

A resurgence of COVID-19 had disrupted truck inflows in February, with just 23 trucks moving coal from Mongolia to China, down sharply from about 100 trucks in January.

Mongolia has emerged as the top coking coal supplier to China in the absence of Australian coal. However, tight pandemic controls on both side of the China-Mongolia border impeded supplies in 2021.

Mongolia's coal exports to China are expected to rise further in the near term, helping ease tight domestic met coal supplies in the country, according to CIFCO.

Met coal stocks at Chinese independent coking producers were at 9.80 million mt in the week to June 24, down 500,000 mt week on week, data from Huajin Securities showed.

Meanwhile, stocks at key Chinese steel producers slipped 10,000 mt on the week to 8.78 million mt.

The inventories at these key producers are expected to last for about 13 days, according to Huajin Securities.

Domestic Situation

Chinese coking sector's profit margins have been squeezed, with coking producers anticipating an unfavorable outlook in the near term, Huajin Securities said.

Market players have adopted a wait-and-watch stance, leading to muted buying interest and bids in met coal supply tenders, according to Huajin Securities.

Henan-based key Chinese met coal producer Pingdingshan Tianan Coal Mining Co. said June 29 that it was temporarily halting exports due to insufficient coking coal inflows to meet required demand.

The producer set 2022 refined coal output at 12.35 million mt, up from 11.88 million mt in 2021. It has contracted to sell 13 million mt in 2022.

Another key met coal producer Shanxi-based Wintime Energy recently said it is aiming to hike its future coking coal output capacity.

Wintime in a filing to the Shanghai Stock Exchange said China was short on met coal resources, with domestic reserves meeting only 20%-25% of local needs.

China's met coal supply is expected to remain tight for the next three-five years with prices elevated, as future new capacity estimated at just 30 million mt/year is not enough to cover domestic demand, Wintime said.

The producer is aiming to speed up the construction of its four coal mines in Shanxi's Qinyang county that have a total 1.5 million mt/year of mined coal capacity. The new mines will bump up the producer's met coal capacity to 11 million mt/year, from 9.9 million mt/year currently, according to Wintime. The timeline to complete these projects remains unknown.

Wintime has coal reserves estimated at 3.83 billion mt and it owns 13 running coal mines.

Guotai Junan Futures, a unit of Guotai Junan Securities, said Chinese met coal demand is expected to receive strong support in the long term, as Chinese authorities pushed back decarbonization targets for the steel sector to 2030, from 2025.