China's thermal coal demand to slip as it completes 3,324km transmission line

About 66 billion kWh of electricity a year will be transmitted from Xinjiang to east China.

China's thermal coal demand is expected to fall once it completes what is said to be the world's longest ultra-high voltage transmission line, a report by S&P Global Platts revealed.

China has launched its 3,324 km long transmission line that connects the coal-rich Xinjiang province in western China to Anhui province in the country's east. Once completed, the transmission line is expected to reduce Chinese coal usage by about 30 million mt per year.

"Now, with the direct power transmission, it's equivalent to adding a stable supply to the market. In addition, Xinjiang coal prices are much cheaper [than other regions]," an east China-based coal analyst said.

About 66 billion kWh of electricity a year will be transmitted from Xinjiang to east China with a voltage of 1,100 kv upon completion, local news agency Xinhua reported.

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Thermal coal demand remained subdued amid uncertainties over the country's import policy as it reined in import volume. China reportedly imported about 281 million mt of thermal coal in 2018, and produced 3.55 billion mt, according to government data.

“Market sources added that besides lower summer temperatures, weak Chinese demand for thermal coal this year is also due to higher electricity delivery from existing inter-regional power transmission grid systems,” S&P Global Platts said.

Electricity delivered across China from January to May was up 12% YoY, whilst power generated from coal-fired power plants was up 0.2% from last year, according to a report from the China Electricity Council. Nuclear and hydro power generation was up 24.3% and 12.8%, respectively, over the same period, data from the report showed.