In early 1994, the International Energy Agency released a statistic that attracted little attention but years later would transform oil markets and the global economy. China, the west's energy watchdog said at the time, had just become “a net importer of oil on an annual basis for the first time since the 1960s”.
The consequences became obvious as China's voracious energy needs propelled the country towards its current ranking as the world's second-largest oil importer, behind only the US – in the process pushing crude prices to a record high of nearly $150 a barrel in 2008. Beijing, which in 1993 imported a mere 30,000 barrels a day, about as much as Ireland does now, is these days buying 5m barrels a day – or the combined production of Kuwait and Venezuela.
Commodities analysts and executives say the shift in 1993 was an example of a “China moment” – what happens when the world's most populous country moves from being an exporter to a net importer of a particular resource (or vice versa in the case of finished goods).
The impact on prices is often not immediately clear. But over time, as the country's import needs grow larger and larger, prices generally rocket. It happened with oil and other commodities including soyabeans, as demand in China proved too much for its own geological or agricultural endowments.
Now it is the turn of coal. Last year, China became a net importer of coal on an annual basis for the first time since reliable records have existed. Including both thermal coal, used to fire power plants, and coking coal, used for steelmaking, Beijing bought 104m tonnes of the commodity, compared with net exports of as much as 80m tonnes in 2003.
The shift is helping to revive the coal industry. After decades of being marginalised in the developed world, coal is being buoyed by the requirements of China and India on top of already huge imports elsewhere in Asia, including Japan, South Korea and Taiwan. The speed of the upturn in demand has surprised many and the industry is not best placed to cope. Bottlenecks in exporting countries will hamper its ability to deliver. But while those may be resolved over time, the fundamental change wrought by China and others will be with us for longer.
The mining industry has being awaiting this new “China moment” to profit from a rise in prices. In interviews, mining executives, consultants, analysts and traders say China will need to buy significant amounts of coking coal from overseas from now on and probably also thermal coal.
Marius Kloppers, chief executive at BHP Billiton, the world's largest miner, says he recalls how the company almost a decade ago sent executives to Chinese coal mines to gauge when demand there was likely to overwhelm indigenous supplies. “We have been waiting for this moment to happen,” he says. “While we are not sure that 2010 will be an exact repeat of 2009, we do expect the trend towards imports in this product to continue.”
The effects, on the industry but also on moves to curb carbon emissions, will be widespread.
Traded volumes on the seaborne coal market are set to reach 1bn tonnes a year about the middle of this decade, a remarkable growth from less than 50m tonnes in the early 1970s. This bodes well for miners such as Xstrata, the world's largest coal exporter, PT Bumi Resources of Indonesia, Anglo American and Rio Tinto. The battle to secure mines to supply China has already begun, with Hong Kong-based trader Noble Group fighting Peabody Energy, the US-based miner, for control of Macarthur Coal, the Australian miner. Global trading houses are also likely to benefit. Glencore, both the world's largest commodities trader and the largest coal trader, is particularly well positioned to cash in on China's needs.
