April 17, 2018 Read More →

China Moves to Slow Coal Imports

Reuters:

The price of seaborne thermal coal in Asia may come under pressure as China moves to impose some import restrictions on imports of the polluting fuel.

Several ports in southern and eastern China have introduced controls on coal imports, ranging from bans on unloadings to tightening customs clearances. Among ports banning imports is the Chuanshon anchorage at Ningbo port, according to a manager at a coal trading house quoted by Reuters on Monday, while Zhoushan near Shanghai is restricting the number of vessels allowed to dock.

What is not clear yet is just how severe these restrictions are, how widespread they will become and how long they will last. What does appear somewhat clearer is that the authorities in Beijing wish to restrict growth in coal imports in order to support domestic coal prices and encourage an increase in local production.

Certainly, news of the restrictions boosted domestic prices, with benchmark thermal coal futures on the Zhengzhou Commodity Exchange jumping almost 3 percent on Monday to close at 570.2 yuan ($90.94) a metric ton. While the authorities don’t officially target domestic coal prices, it’s widely believed in the industry that a range anchored around 550 yuan a metric ton is a level that Beijing feels provides miners with sufficient revenue while not unduly boosting costs for power generators.

The spot thermal coal price at Australia’s Newcastle port closed at $93 a metric ton on Monday, up a mere 0.2 percent from Friday’s close. The price is also down about 15 percent from the peak so far this year of $109.50 a metric ton reached on Jan. 17. It’s not unusual for prices to retreat after the peak winter demand period, but the risk for the seaborne market is that the restrictions on imports in China actually cuts into demand.

Imports of all types of coal rose 16.6 percent to 75.41 million metric tons in the first three months of 2018, compared to the same period last year, according to China’s preliminary customs data. While not as fast a pace of increase as in the first quarter of 2017, it’s likely that the authorities would rather see coal imports retreat rather than rise.

More: China Move To Restrict Coal Imports May Drive Price Divergence: Russell

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