Chinese govt lays ground for thermal coal import relaxation at NDRC meeting: source

Singapore — The Chinese government may possibly relax thermal coal import policy in the near term amid supply shortage of domestic material and weaker hydropower and with strong power demand expected in summer, a source close to the subject matter said.

The Chinese government might relax thermal coal import policy in the near term because of a shortage of domestic material, lower hydropower generation and strong power demand expected over the summer, a source close to the matter said.

The source said that during an internal meeting with the National Development Reform and Commission on July 11 government officials pointed to the recent rise in domestic Chinese coal prices, which have moved into the "red zone," as possible grounds for a relaxation of import policy.

China has tried to keep its domestic 5,500 kcal/kg NAR price within a band of Yuan 500-570/mt ($71.41-$81.41/mt) to ensure a fair deal for both its producers and consumers, but the price has recently moved above Yuan 600/mt on a combination of strong demand and import restrictions.

Although there were no timelines on the relaxation of the import policy, it would kick in progressively if coal supply were not enough to meet Chinese power demand despite domestic mining companies being told to ramp up coal production, the source added.

The NDRC was not available for comment.

China produced 1.48 billion mt coal over January-May, up 0.9% on the year, according to data from the National Bureau of Statistics.

Chinese January-May hydropower generation was 359.2 TWh, down 42.3 TWh on the year, according to NBS data.

Market sources also said some of the tightness in coal supply might be down to China half-closing its door to imported coal since March at the same time as Chinese mines underwent safety inspections.

NDRC has signaled its intention to intervene in the market if the Qinhuangdao 5,500 kcal/kg NAR spot price trades above Yuan 600/mt FOB -- its red zone -- for a prolonged period, sources said.

The move came on the heels of Huaneng urging its fellow Chinese utilities to shift to long-term from spot domestic coal deals after trades were concluded at Yuan 600/mt FOB on July 8.

Following the meeting, Chinese domestic coal offers for 5,500 kcal/kg NAR grade edged down Yuan 4 on the day to Yuan 591-600/mt FOB Qinhuangdao July 14.

Seaborne coal market rises

So far, no fresh import quotas have been issued, but market sources said they expected import policy to be relaxed over the summer, which was why the seaborne market started the week on a bullish note, sources said.

China's coal imports in January-May were 148.7.9 million mt, up 16.8% on the year, preliminary data from China's General Administration of Customs showed.

"Although I am happy about better sentiment, fundamentally, there have not been any changes as long as no fresh import quotas are released into the market," a Singapore-based trader said.

Market sources were concerned about the sustainability of the rise in the seaborne coal price, which was sentiment-driven.

Bids for 3,800 kcal/kg NAR Indonesian coal on August-loading Supramax were heard at $24/mt FOB July 14, up $1 from the last trade concluded for similar grades on July 9 before the NDRC meeting.