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Chinese state-owned end-users given verbal notice to stop importing Australian coal: sources

Highlights

Australian thermal coal exports remained resilient

Chinese buyers were cautious on uncertainty

Singapore — State-owned utilities and steel mills in China received verbal notice from China's customs to stop importing Australian thermal and coking coal with immediate effect, several sources close to the matter told S&P Global Platts Oct. 9.

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State-owned utilities including Huaneng Power International, Datang International Power Generation Company, Huadian Power International and Zhejiang Electric Power Co Ltd were heard to have received the verbal notice from China's customs, sources said.

Huaneng Power International and Huadian Power International declined to comment.

Datang International Power Generation Company and Zhejiang Electric Power Co Ltd were not immediately available for comment.

A state-owned utility has temporarily halted the execution of a vessel of high-ash 5,500 kcal/kg NAR Australian coal contracted earlier, a source close to the matter said.

Although there was no clear timeline for the Australian coal ban, sources expected imports of Australian coal to remain difficult till the political tensions between the two governments are resolved.

However, the market was still in the process of understanding its impact as the means and extent of its implementation remained unclear, sources said.

Offers were heard for high-ash 5,500 kcal/kg NAR Australian coal loading in November at $40.50-$41/mt FOB on Oct. 9, down $1-$4.50 from Oct. 7 while unconfirmed offers were heard at $39-$40/mt FOB.

Bids for this grade were heard at $40/mt FOB, down $2 from Oct. 7.

Resilient Australian exports

Australian thermal coal exports to China have been fairly resilient despite Chinese coal import quotas being hit at some ports as early as April this year, according to S&P Global Platts Analytics.

Over January-August, Australia exported 38.6 million mt of thermal coal and 31.6 million mt of metallurgical coal to China, up from 4.6 million mt and 8.5 million mt year on year respectively, Platts Analytics said.

However, August imports from Australia are markedly lower year on year, according to Platts Analytics.

Platts Analytics expects Chinese coal imports to remain low until the end of the year, unless import quotas are relaxed, which is not its base-case assumption.

Some of the state-owned utilities said that they have limited imports of Australian coal following a similar announcement on May 18.

Five major state-owned utilities were verbally warned by China's National Development and Reform Commission not to buy Australian thermal coal "for the time being" on May 18 to boost Chinese domestic coal prices, according to sources close to the matter.

Met coal buyers cautious on talk of import limits

In the metallurgical coal segment, several market participants said that they have heard the restrictions on Australian imports have been tightened.

"It seems there will be few opportunities for buyers to purchase Australian coals. Some end-users have received verbal notice from customs, but no official announcement has been made," a Chinese trader said.

A source at a major steel maker in Northern China said the restriction on Australian imports "should be real," but "it's not clear how long will this restriction last," he said.

At Caofeidian port, one of the major coking coal ports, there were more than 20 vessels waiting for port-clearance and "the overwhelming volume at port could contribute to the restrictions on further purchases," a source from the port authority said.

Market sentiment turned more bearish on talk on port-related changes, and the benchmark Premium Low Vol price fell 5% to $132.25/mt FOB Australia within one day on Oct. 7, reflecting the weaker outlook for demand.

As Chinese buyers return from the Golden Week holidays, both sell and buy sides retreated to the sidelines and offers were absent on concerns about port-related policies.

"The outlook for Australian imports to China is not optimistic, we have to wait-and-see how the situation evolves," a Chinese trader said.