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Coronavirus Hits Coal Mining in China and Import Logistic Chain

Coal News - Published on Fri, 07 Feb 2020

Image Source: Coal China
Reuters noted columnist Mr Clyde Russell wrote that China’s domestic coal mines are struggling to ramp up production in the face of the on going coronavirus epidemic. While there may be increased demand for imported coal in China in coming weeks, the problem for major exporters such as Indonesia, Australia and the United States is going to be one of logistics. The coronavirus is starting to have an impact on supply chains and will make it more challenging for shippers to find vessels to go to China. And even if exporters do get their goods to Chinese ports, they will likely face headaches in unloading cargoes and transporting them from docks to end-users.

The challenge of shipping coal to China was illustrated by the Australian government’s decision to impose a 14-day quarantine on vessels leaving mainland China after February 1. This means such vessels will face delays upon reaching Australian ports, as the sailing time between China and both the east and west coasts of Australia is generally less than 14 days. Vessel queues outside Australian coal ports are already lengthening. Argus Media reported on February 4 that the number of ships waiting outside Newcastle, the world’s largest coal export harbour, was at an 18-month high of 20 vessels. There are some other factors that may be contributing to longer vessel waiting times, such as weather and port and rail maintenance, but the overall trend is clear: Shipments to, as well as from, China are becoming more complicated to arrange.

One thing that is working in exporters’ favour is a sharp decline in shipping rates. At these freight prices, shipping companies will be losing money on every voyage, while they are also facing higher costs from the mandatory switch to cleaner fuels that kicked in last month as part of a change in global shipping regulations known as IMO2020. While the cost of shipping may be depressed, the main challenge will be securing vessels with owners prepared to send them to China.

The coal market appears to be reacting with caution to the coronavirus, with still considerable uncertainty over how much domestic output has been lost, what transport bottlenecks exist currently in China and whether more imported coal will be needed. Even if it is, can it get there efficiently?

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Posted By : Yogender Pancholi on Fri, 07 Feb 2020
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