Singapore — China's southern coal import region Huangpu custom in Guangdong province has started conducting spot checks on the final destination of thermal coal imports, Huangpu custom told local traders June 29, according to sources.
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The move came on the heels of Huangpu's temporary halt in accepting customs declaration for coal imports, having exhausting its quota for the year.
An owner of one seaborne cargo was found to have bought the cargo supplying to an end-user different from the declared end-user, a South China-based trader said.
"Huangpu custom has set up special investigation force to check the trade flows of seaborne coal in order to ensure cargoes waiting to berth were supplying to local end-users," a South China-based trader said.
Huangpu custom was not available for comment.
Some traders took positions with import quotas obtained from utilities, hence the government took action to punish them, sources said.
"The government might want to limit trading activities, and ensure China only imports coal to satisfy end-users' demand," a South China-based trader said.
Although some traders were hopeful of fresh quotas being released by China as several power utilities were said to be submitting their requirements for import quotas in August by this week, there has not been clarity around the approval of fresh quotas from the authorities, sources said.
"I am not sure when will Huangpu resume custom declaration," another South China-based trader said.
Traders in China were skeptical about a relaxation of coal imports after the cancellation of several cargoes arriving for utilities, together with strict inspection of trade flows of cargoes, a South China-based trader said.
"There is a lot of downward pressures on seaborne coal prices, as well as a shift of coal purchase pattern in China that followed," he said.
There has been a shift from high sulfur mid-CV to low sulfur high-CV Indonesian coal, replacing a portion of the shortfall in Indonesian bituminous coal demand in Japan and South Korea, he said.
Bituminous coal imports in Indonesia from January to April were up 3.2 million mt year on year at 24.9 million mt, while sub-bituminous imports from January to April in Indonesia were down 9.7 million mt at 91.3 million mt, according to Indonesian statistics.
Meanwhile, demand for low-CV 3,800 kcal/kg NAR Indonesian coal remained solid for end-users with import quotas, several traders said.
Demand has shifted from seaborne coal to Chinese domestic materials, as Chinese domestic prices for 5,500 kcal/kg NAR grade were stable to higher at Yuan 573-Yuan 580/mt FOB Qinhuangdao [$81-$82/mt] on June 30, sources said.