Admittedly Australia’s thermal coal exports have grown more slowly over the past 18 months, however, they have continued to expand. In the first three months, thermal coal exports grew 5.9% year on year to almost 50 million tonnes.

The National Australia Bank’s latest Bulk Commodity Update holds some consolation for thermal coal players. The update said coal remained the dominant fuel in China’s energy mix.

That aside, there is no doubt that coal consumption in China is falling.

Total production for both thermal and metallurgical coal in China was about 1.15 billion tonnes in the first four months of the year – a decline of 6.1% year on year. This is still a big chunk of the roughly 3Bt that the world produces in total.

NAB said the falling domestic production and imports pointed to much weaker demand than in previous years.

The China National Coal Association forecasts production to fall by 5% in 2015.

NAB senior economist Gerard Burg told International Coal News yesterday that coal constituted about 70% of China’s energy mix in 2013, but this was expected to drop this year due to significant cutbacks in the electricity generation sector.

When China talks about “energy mix”, it includes both met coal and thermal coal as steel production is included in the equation.

“The trend of falling domestic consumption is set to continue, with official targets to cut coal consumption by 13 million tonnes in the five years to 2017,” NAB said.

“Outside China, thermal coal demand in Japan is likely to be impacted by the phased restart of the country’s nuclear generation capacity.”

In late May, the third and final approval was granted to the Kyushu Electric Power Company to restart two units at the Sendai nuclear plant – likely in mid-July. The company expects the plant to return to normal operation by mid-August.

Before this happened spot prices for thermal coal had been relatively stable in May – having recovered from sub-$US60/tonne prices in April.

The active Newcastle contract on the Intercontinental Exchange traded in a $2.50 range across the month, trending back towards $60 at the end of the month – almost 18% lower than a year earlier.

This minimal volatility in prices followed the settlement of Japanese financial year contracts in April, which set the annual contract price at $67.80/t – a fall of 17% from the previous contract.

“Falling prices since early 2014 in part reflect the declining demand from China for internationally traded coal,” NAB said.

“In the first four months of the year, China’s imports of thermal coal fell by almost 41% year on year to total 54.4Mt.”