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Southern Chinese ports prioritize thermal coal imports; coking coal buying slows

Singapore — Coking coal end-users in southern China are taking a step back from making seaborne purchases, given that port authorities are now prioritizing thermal coal imports over coking coal to meet summer power generation demand, trade sources said this week.

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Under current import restrictions on coal in southern China, authorities at ports such as Fangcheng, Xiamen and Kemen were allocated import quotas for the year by provincial governments and the General Administration of Customs. The port authorities in turn, allocate these quotas to power plants and steelmakers.

But with China now in the midst of summer, demand for thermal coal from the power generation sector has increased, leaving less quotas available for coking coal, sources said.

At Fangcheng port in southwestern China's Guangxi province for example, about 4 million mt of coal import quotas were left for the second half of this year, and coking coal volumes were understood to have been, or close to being maxed out for the year, according to sources' estimates.

In southeastern China's Fujian province, one steelmaker said he understood there were no allocations for coking coal at ports such as Xiamen and Kemen, and priority has been given to power plants.

"We want to buy coal but there is no coking coal allocation for Xiamen and Kemen ports," one Fujian-based steelmaker said.

Two steelmakers said the restrictions for coking coal imports could ease from October when temperatures cool and thermal coal demand slows down, but the possibility of buying seaborne coking coal would still depend on the quota allocated.

Uncertainties over the implementation of coal import restrictions have already seen a sharp shift to the domestic coking coal market for a southern Chinese steelmaker. He said that his domestic procurement of coking coal for the second half of 2018 surged more than 50% from the year-ago period.

At Rizhao port in eastern Shandong province, market sources said there was greater scrutiny of documents as authorities would like to ensure the imported cargoes were meant for end-users.

Over at Jingtang port in northeastern China's Tangshan, coking coal imports have not faced any restrictions but coal-related trucking activities were banned briefly from July 13-18.

--Weng Yile, yi-le.weng@spglobal.com

--Kate Zhou, kate.zhou@spglobal.com

--Edited by Irene Tang, irene.tang@spglobal.com