Until arrangements are in place for Mongolia to export
its coal to other destinations, China will remain its biggest buyer and there
is good news in that China is set to overtake Japan as the world’s largest
importer of thermal coal as soon as this year, only three years after China
became a net importer of the mineral used to fire power stations, according to
an emerging industry consensus. The speed at which Chinese coal imports are
growing is surprising mining companies, traders and policymakers, who had
previously not expected China to overtake Japan before 2015. China was a net
exporter of coal until 2007.

Beijing’s appetite for imported thermal coal bodes well
for mining companies but policymakers are concerned about the impact of rising
buying on global energy prices and carbon emissions. The increase in coal
prices will increase electricity prices and increase the cost of manufacturing.
China is already the world’s largest coal producer but domestic supplies can’t
meet the growing demand.

The surge in coal imports comes on the back of rising
power demand. China relies on coal to produce 80 per cent of its electricity,
double the world’s average. China would add 500 gigawatts of new coal-fired
electricity generation capacity between now and 2020, almost double Japan’s
current total power generation capacity.