The re-emergence of growth in China's economy will come as relief to many coal producers, but analysts caution that a quick recovery in coal prices is unlikely.
Following 13 months, or seven consecutive quarters, of slowing manufacturing growth, China finally recorded accelerating growth in its critical industrial sector. The HSBC Flash China Purchasing Managers' Index rose to 50.4 in November, which indicates an accelerating growth rate, after showing signs of increase for the past three months. State-led growth programs are held as key catalysts for this growth, and are pushing the world's second-largest economy back towards upping its sliding GDP. But despite positive economic signs from the world's largest coal consumer, substantial outstanding thermal coal surpluses — the leading energy source for factories in China — mean that any industrial or manufacturing growth is unlikely to translate to higher coal prices for some time yet. China is “awash with coal” James Stevenson, a researcher with IHS McCloskey, told Bloomberg this week. “We're seeing China's growth slowing. China's oversupply will reverberate around the world in the second half. That's tanked international prices.” Coal inventories in China's major power plants reached 93.71 million metric tons at the end of October, or the equivalent of 29 days' usage, eight days more than the same period last year, Morning Whistle reported. In late November, Reuters reported that traders in China defaulted on at least three Australian thermal coal shipments as high stocks and low regional coal prices pushed some buyers out of the market. On the whole, China's net coal imports have increased by 39.5 percent so far this year, to 217 million tons, according to data released by the National Development and Reform Commission this week.