China and Japan's inventory growth affects coal and iron ore prices

The decline in industrial output in Australia’s major export market for minerals, China and Japan, and the resulting increase in inventories have put pressure on coal and iron ore prices.

As the inventories of ports and coastal power plants such as Qinhuangdao and Guangzhou continue to increase, China has stopped importing thermal coal from Australia and Indonesia. GraeME Train, Macquarie’s commodity analyst, said that the increase in inventories was due to a downturn in economic activity that led to a drop in demand, and also due to rapid growth in supply from South Africa and Indonesia. Platts also believes that as expected prices continue to fall, unpaid buyers begin to demand an order back.

Traditionally, Chinese demand will be relatively strong before the Lunar New Year, but this year, Chinese businesses have already indicated that they will not continue to replenish their inventory because of sufficient inventory. As of last Friday, Newcastle's thermal coal export prices have fallen for 13 consecutive weeks, with a drop of 11%.

Japan's weak industrial output has also significantly slowed steam coal imports.

Jeannette Sim, an analyst at Royal Bank of Scotland, said that due to the imbalance in the balance of the steel industry and the low willingness of traders to stock inventory, iron ore imports in December will also decline.