February 1, 2019 - Metallurgical coal import restrictions at Chinese ports came under the limelight once again as a number of ports appeared to be struggling with the high inflow from Australia, resulting in long delays to customs clearance, industry sources said Friday.
China imposed restrictions on met coal imports at several ports in northeast China including Bayuquan, Dandong and Dalian effective Tuesday afternoon, according to Chinese steelmakers. This, however, could not be confirmed with Chinese government and port officials.
The list of ports facing restrictions extended further by the end of the week to those in Shandong and Guangdong provinces, among others, the sources said.
As of Friday, shippers of Australian met coal cargoes arriving at ports in Shandong and Guangdong provinces, and some others, were told that the cargoes would not be cleared by customs until further notice, sources said. This could see typical waiting times blow out from 25 days to 40 days, they added.
Strong arrivals of met coal, when import restrictions were imposed in November last year, could have caused the current situation. Cargoes that arrived in China during November and December could only be cleared by customs in January, resulting in a significant increase to January arrival volumes.
According to S&P Global Platts data, a total of around 3 million mt of met coal traded on the global spot market in November and December. This would imply that January's arrivals were in the region of 8.6 million mt, given that Platts has observed spot volumes to typically account for around 35% of China's total met coal imports.
China imported 64 million mt of met coal in 2018, according to China customs data, giving a monthly average of 5.3 million mt. The volume potentially imported in January is some 3.3 million mt higher, which could be the reason for the customs bottleneck.
In addition, there was a big jump in January spot transactions compared with December. Platts observed that 3.6 million mt of spot cargoes were sold to China in January, up 157% from December. Using the same criteria that Platts typically observes -- spot volumes typically accounting for around 35% of China's total met coal imports -- this would imply that some 10.3 million mt of met coal are due to arrive over February and March , according to Platts calculations.
An Australian miner said Australia was the biggest supplier to China which is why its material was being impacted by the slow customs processing.
Seaborne Coal Cheaper Than Domestic Coal
Seaborne coking coal prices have been lower than domestic coal for a while now, a southern China steelmaker said, noting that this has resulted in surging imports.
But others in the market offered a different interpretation, believing the port restrictions were not solely about the import volumes, but due to increasing tensions between China and Australia.
"I do not think it's simply a quota issue given that we are only at the start of the year," an eastern China-based steelmaker said. He pointed out that the measures had only affected Australian coals and not Mongolian coals -- which arrive by land rather than sea -- which are subject to the same quota limits.
Looking beyond the current issue, sources said Chinese end-users would still largely look to Australian coking coal to meet their requirements.
"China still needs to buy Australian coking coal given their need for high CSR and low ash," a trader said, referring to China's efforts to improve the environment through using higher quality input.
"Nothing has really been confirmed and [the port clearance restrictions] have not really impacted our business yet. We will wait and see what happens," another Australian miner said.
Australia accounted for 43.2% of China's coking coal imports of 64.23 million mt in 2018.
On Thursday, Platts assessed Premium Low Vol coal down $3/mt day on day to $201/mt FOB Australia, while the CFR China price was down $3.25/mt day on day at $205/mt CFR China.