China Hydro Power Cuts Coal Need

Record production of hydropower from China's Three Gorges and newer dams is displacing so much coal that rates to transport it have plunged to record lows, roiling the shipping market.

Daily earnings for Panamaxes, vessels that are about 750 feet long and get most of their spot cargoes from hauling coal, slumped as much as 76 percent this year, getting to within $26 of an all-time low.   China started hydroelectric plants this year with enough generation to replace 26 million tons of coal, or about 370 cargoes, data compiled by Bloomberg show.  The extra power means less imports and weaker freight rates, Morgan Stanley estimates.

While global shipments of iron ore and grain are rising, China's decreasing appetite for imported coal is a challenge to transporters already seeing weaker rates because of an oversupply of Panamaxes.  The world's second biggest economy's efforts to curb air pollution will help cut imports of power-plant coal by 2.7 percent this year, according to Goldman Sachs Group Inc., following average increases of 29 percent annually from 2010 to 2013.

Seaborne imports of thermal coal in China will slide for the next four years, reaching 75 million metric tons by 2018, half the level of last year, Goldman Sachs said.  Coal imports to India, Japan and South Korea will keep growing, it estimates.

China Hydro Power Cuts Coal Need