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China end users told to stop importing Australian coals from Nov 6: sources

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China end users told to stop importing Australian coals from Nov 6: sources

  • Autor/a
  • Jessie Li    Jenny Ma    Jun Kai Heng
  • Editor/a
  • Jonathan Fox
  • Materia prima
  • Carbón Metales

Singapore — Chinese steel mills have received verbal notices from the Ministry of Commerce to stop importing Australian coals starting Nov. 6, several sources close to the matter told S&P Global Platts Nov. 3.

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The ministry held a meeting Nov. 2 to discuss various issues on import policies, including restrictions on Australian coals, sources said. Several steel mills told S&P Global Platts they had received verbal notices from the local authority while others said they had yet to receive any such notice. Chinese end users previously received verbal notices from customs to stop importing Australian coals but with no clear timeline.

The meeting also made clear that Australian coals arriving in China prior to the Nov. 6 deadline would be considered for port clearance, the sources said. Cargoes arriving after that date would be waiting at the port while contracts signed before Nov. 6 would have to be suspended if the cargo could not reach port before that date.

Market participants said it was unclear why the restrictions had been introduced, but sources have said that factors such as political tensions between Australia and China and surging Australian coal imports into China in 2020 could have contributed to the decision.

Market participants said the impact of the most recent updates on the speculative activity of traders could be significant, as end users have already started to avoid purchasing Australian coals. While market participants predicted a limited impact on already loaded Australian cargoes, there were expectations of a sharp downturn in buying interest for December-loading cargoes, given the increased uncertainty if they are cleared in January. A Chinese trader indicated that higher discounts on account of the risk factor would have to be factored in for forward Australian cargoes and buying interest may focus on US and Canadian brands instead.

"Some traders had the expectation that such restrictions might be relaxed towards the end of the year, but now, speculative demand for Australian coals is likely to plunge with the latest update from the Ministry of Commerce," a Chinese trader said.

Chinese end-users have been actively seeking alternatives to Australian coals. According to Platts spot trade data, buyers in China purchased 390,000 mt of non-Australian premium coking coal in October, while such trade flows in the premium coking coal segment in the same period last year were entirely absent.

A Chinese end user said that while existing stockpiles were largely sufficient to last until January, it is becoming increasingly likely that even larger end users will look into a permanent change to their blend requirements give the current situation.

Thermal coal end users

Chinese state-owned utilities have not received any further verbal notice on a clear timeline for the ban on Australian coals, but most have refrained from seeking fresh Australian coal cargoes since October, after receiving a verbal warning from the authorities on Oct. 9, several utilities said.

"We will not import Australian coal due to the high political risk involved," a utility source said.

Another utility source said: "There hasn't been any fundamental change to the status quo of the Australian coal ban since the last verbal warning; Australian coal is not part of our procurement for next year."

Several Australian coal cargoes contracted earlier this year were still waiting for permission from authorities to berth, he said.

Pessimism loomed large on rising political tensions between China and Australia, especially for Australian coking coal, a miner said.

Market sources said the recent notification was aimed at putting pressure on Australian coal imports as some ports in southern China expedited the customs declaration process for non-Australian coal in anticipation of the release of fresh quotas for 2021.

Trading in non-Australian coal was heard, including but not limited to Russian, Indonesian and Chinese domestic coals, but for Australian coal activity remained scarce in China, several sellers said.