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Coaltrans China - The role of e-commerce in thermal coal trading

Thermal coal is expected to have a larger share in China’s total coal import. Importers are able to “pre-sell” the products a few months ahead on the newly launched e-commerce trading platform, which provided a more transparent and efficient process and has seen an initial success in the first quarter.

Thermal coal is expected to have a larger share in China’s total coal import. Importers are able to “pre-sell” the products a few months ahead on the newly launched e-commerce trading platform, which provided a more transparent and efficient process and has seen an initial success in the first quarter. 

 

In 2013, China has imported 327 million tons of coal, of which 113 million were thermal coal. With the relaxation of tariff policies, the cost of import is becoming lower. However, the coal trading process is known to be “circumvent“ and have a “lack of credibility and transparency”, according to Li Hongguo, Chairman of Ecoal China who spoke at the 12th Coaltrans China Conference held in Shanghai.

 

The new e-commerce trading platform, which was launched in January 2014, provided a new mode of bulk coal procurement in a standardised transaction process.

 

“The core idea is that the seller would be able to take orders based on its future productivity and pre-sell the products to the purchaser, hence effectively minimize the problem of excessive stock,” said Li.

 

Financial services also played a key role in the e-commerce supply chain. Li said that very few coal traders are able to secure financing from commercial banks. Ecoal China, which was originally a service provider and manager of the coal supply chain, incorporated the use of financial instruments into the supply chain in 2010. He revealed that last year, the amount of financing totaled Rmb1 billion.

 

The process starts with the negotiation between market makers and international suppliers for the preparation of production. This includes collecting the down-stream demand feedback, resource integration and preparation of the trade fair.

 

The trade fair is held on a fixed day of each month, when market makers release the products online for sale in a limited time – two hours, for purchasers to subscribe.

 

After subscription, contract is signed and deposit paid. In the next 30 to 90 days, market makers and international supplier will organize the shipment. Products will be delivered to purchasers once it has arrived at destination ports in China.

 

In the case of domestic coal trading, products can be sold 30 days before it is delivered by sea, rail or road. 

 

“Bulk coal procurement thus becomes a standard process which is more transparent and efficient,” Li said.

 

The production information is released one week prior to the trading day, which is designated on the first Thursday after the 20th day of each month. Buyers will have to confirm their intention of purchase five days before the trading day. 

 

Li also said that the process is gradually matured and will be rolled out more extensively this year.

 

According to his estimation, China’s imported coal is expected to be more than 300 million tons in 2014, while thermal coal accounts for 40% of it, at 120 million tons.

 

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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