China and Indonesia sign £1bn deal for thermal coal imports
China will buy £1 billion worth of thermal coal from Indonesia next year following the signing of a trade deal between the Indonesian Coal Mining Association (APBI) and China Coal Transportation and Distribution, according to a Reuters report.
"It is hoped that there will be an increase of coal exports to China by 200 million tonnes in the coming year," the APBI says in a statement. "The target quantity will be reviewed every year."
Indonesia, the world’s top exporter of thermal coal, has resorted to diplomatic channels to promote coal sales around Southeast Asia, particularly in Vietnam, as exports to China have slowed.
China’s imports from Indonesia, the world’s biggest shipper of thermal coal used in power plants, dropped by 24.5 percent in the first 10 months of 2020 to 86.88 million tonnes, compared to 115.03 million tonnes during the same period last year, according to data from Refinitiv.
However, according to an analysis published by Wood McKenzie, China’s thermal coal imports are forecast to increase in December this year.
According to the market analyst, seaborne thermal coal imports will grow from 9.5Mt to 20Mt in December, with the new figure much higher than 8.8Mt recorded in September this year, or the 17.7Mt average for the first nine months of the year.
In Wood McKenzie’s view, the increase will help ease domestic prices and strengthen seaborne prices. It explains that the massive increase in imports is due to a series of factors that have hindered the National Development and Reform Commission’s goal of relying more on local suppliers in order to stabilise the price for QHD5500 to below £68.18/t.
“The QHD price has stayed at above £68.18/t since late September. The market news is that the NDRC asked coal miners to increase supply at the end of September and that domestic supply increased in October to 336 Mt, compared with 331 Mt in September, or 325 Mt last October,” the analysis reads.
“But mine accidents in Shanxi, Shaanxi and Inner Mongolia have prevented output from increasing further, and the coal price has remained around £69.88/t.”
Despite the accidents, coal imports dropped to 14 Mt in September, the lowest since May 2011.
However, according to the analyst, the expected increase, which NRDC would use to balance the market, is a negative measure.
“We do not think 20 Mt of additional coal should be purchased for delivery to China in December. Firstly, it would cause both seaborne coal prices and freight to immediately spike, which is not what the Chinese government wants. Secondly, unloading imported coal in Chinese ports will not be easy any time soon as we estimate the ports are full of imported coal yet to clear.
Finally, coal generation in the coastal region is weaker this autumn than last because of strong hydrogeneration. The coal inventory is higher than last year, making it difficult for gencos to stock the imports flooding in,” it points out.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.