From the Economist,
FIRST a tsunami of steel—next a flood of what? Industrialists all over the place might look nervously at China’s cooling economy and ask that question. The global glut in steel is most alarming because China’s industry dwarfs all others and its mills could easily produce more. Yet other sectors also have existing or looming gluts.
One is coal. Thanks to a massive expansion now under way, China’s coal industry could have 3.3 billion tonnes of excess capacity within two years, reckons Fitch, a rating agency; domestic consumption is less than 4 billion tonnes a year and dropping. Traditionally China has imported, not exported, coal—but that could change. Shenhua Energy, the country’s biggest coal miner, says it might export 10m tonnes soon, up from 1.2m tonnes last year.
A report by JP Morgan states,
The Chinese government is working to reduce coal’s share in its powergen mix by one percent to 63% this year. It is also taking steps to curtail as much as a billion tonnes of excess coal production capacity over the next few years. However there is about a billion tonnes of new capacity expected to come online over the next two years likely offsetting the capacity cuts. Though we see the anti emissions policies as real and China recently halted 15 “under construction” coal-fired power plant projects in Mongolia and Shanxi. Another emerging risk for the seaborne thermal market is of rising Chinese coal exports. Shenhua is considering exports of as much as 10mt of coal to Korea and Japan which, given lower freight costs, could hurt coal demand from Australia and Indonesia.
Maybe that’s why…