Record China imports unlikely to excite coal market: Clyde Russell

The real difference between coal and iron ore is the outlook for supply, with iron ore still potentially slightly constrained, especially if Indian exports remain depressed due to a crackdown on illegal mining and rising domestic consumption.

Coal supply stands to exceed demand for a second year in 2013, with Barclays estimating an additional 32 million tonnes will be available this year.

However, if China's appetite for imported coal grows at the same rate in 2013 as it did last year, this implies an additional 65 million tonnes.

Even a slackening to half of 2012's pace would still see China absorb the entire available additional coal.

Add to this India's growing imports as domestic output continues to fall short of target, and there is the potential for the coal market to tighten throughout the year.

Cold weather in India may push up imports by half in January to 16 million tonnes from a year earlier, according to trade sources.

Already, India has imported 90 million tonnes from April to November, a gain of 27 percent over the same period in 2011, and the signs are that this growth rate will accelerate further over the whole financial year to end March.

It seems for now the coal market doesn't believe the rising demand from China and India is sustainable, or that supply will increase by more than expected.

It's also probably the case that China's appetite for imports is because prices are low, making imported coal competitive with domestic supplies.

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