SHANGHAI, Sept 3 (Reuters) - China, the world’s top coal importer, is expected to soon put curbs on shipments of low-quality coal, responding to calls for support from the country’s miners who are seeing widespread losses due to oversupply and anaemic demand for the fuel.
The China National Coal Association has sent a proposal to the government calling for imports of low-quality coal with ash and sulphur content exceeding 15 percent and 0.6 percent, respectively, to be halted, sources from coal producers and power utilities said.
The National Development and Reform Commission (NDRC) and the National Energy Administration (NEA), which are key policy-setting organs of the Chinese government, have already signed off on the proposal, the sources said. It still awaits approval from China’s State Council to be written as law.
The plan is set to hit Australian coal exports hardest and block out tens of millions of thermal coal imports by year-end, the sources said.
“The association’s rationale is to try to cut total imports by about 10 percent to restore balance in the domestic market,” said a source with a major coal producer who has been briefed on the association’s proposal at a meeting last month.
Officials from the coal association declined to confirm details of the proposal. The NDRC and NEA could not be reached for comment.
If the regulation is implemented, Australian and South African coal with a heating value of 5,500 kcal/kg will be worst hit, since their ash content hovers around 23-25 percent and they contain sulphur of 0.8-1.0 percent, traders said.
Top steam coal exporter Indonesia, which largely ships fuel with low heating value, sulphur and ash content, will be the least affected.
China imported about 54 million tonnes of Australian thermal coal and another 13 million tonnes from South Africa in 2013 - most of which would not meet the proposed restrictions on ash and sulphur content.
“We think the document may come within days or weeks. Beijing already hinted at restricting imports of low-grade coal previously and is well aware of the need to take swift actions to arrest the crisis,” said an executive at a large coal firm.
The association, which represents about 1,000 coal miners in the country, had mooted a proposal last year to bar imports of coal with a heating value lower than 4,540 kcal/kg, sulphur content higher than 1 percent and ash exceeding 25 percent.
The plan did not get the government’s nod due to protests by utilities, who argued that they had long-term contracts that had to be honoured and that such a rule would jack up their costs.
But with more than two-thirds of Chinese coal miners now deep in the red and more than half of the firms either delaying or cutting staff salaries, the State Council is expected to soon implement import curbs to support the highly leveraged sector.
Hit by slackening demand growth, a worsening supply glut and Beijing’s war on smog, China’s benchmark thermal coal prices have been on a downtrend since late 2011 and are now hovering around six-year lows, at 478 yuan ($77.75) a tonne.
To help shore up prices, the country’s major coal producers, including Shenhua Group, China National Coal Group and Datong Coal Mine Group, have cut output, with promises to slash production by as much as 10 percent this year.
At an industry meeting on Aug. 28 attended by coal miners, power plants and chaired by NDRC director Lian Weilian, the commission said coal production should be cut by 200 million tonnes in the second half of this year and urged local governments to shut down outdated mines.
As part of Beijing’s anti-pollution campaign, the NEA, in charge of researching and drafting strategies to address China’s energy needs, is also studying plans to ban power stations from using coal with ash and sulphur content of more than 16 percent and 1 percent, respectively, local media reported. (1 US dollar = 6.1480 Chinese yuan) (Editing by Muralikumar Anantharaman)