(Repeats item issued earlier. The opinions expressed here are those of the author, a columnist for Reuters.)
* GRAPHIC - Newcastle Weekly coal price vs. China domestic price: tmsnrt.rs/2TKmGqQ
LAUNCESTON, Australia, May 28 (Reuters) - Australia’s coal exporters are bracing for a slump in shipments to China, making it somewhat ironic that May is likely to be the strongest month in nearly two years for Chinese imports from Down Under.
Traders are expecting that China’s coal imports may fall in coming months amid moves by Beijing to restrict cargoes to protect the domestic mining industry and prices.
While the port restrictions are expected to apply to all coal exporters, including China’s major suppliers of Indonesia, Australia and Russia, it’s also possible that Australian cargoes may suffer more given the ongoing political tensions between Beijing and Canberra.
China has already imposed a ban on meat imports from four Australian processors, a massive tariff on barley that effectively ends the trade, and has threatened other measures amid Beijing’s displeasure at Canberra advocating for an international investigation into the origins of the novel coronavirus in the Chinese city of Wuhan.
But while Australia’s coal exports to China may be under the threat of restrictions in coming months, the current month is on track to see the highest level of imports since July 2018.
China’s imports from Australia were estimated at 10.45 million tonnes in May, according to vessel-tracking and port data compiled by Refinitiv.
The data was filtered to show only cargoes that have already been discharged or that will have unloaded by the end of the month.
The final figure is still subject to revision but assuming it is close to the current estimate, May’s imports from Australia would be up 56% from 6.7 million tonnes in April and up 20% from 8.71 million tonnes in May last year.
There is likely some catch-up at work in the May figures, given imports from the February to April period were likely lower because of the economic lockdown across much of China as the country battled to contain the spread of the coronavirus.
It’s also likely that the sharp declines in the price of both thermal and coking coal encouraged Chinese traders, utilities and steel-makers to buy more.
IMPORT PRICES SLUMP
The weekly index for thermal coal at Newcastle Port , as assessed by commodity price reporting agency Argus, dropped from a year-to-date high of $69.59 a tonne in mid-January to a low of $49.15 in the week ended May 7, the weakest price since January 2016.
Coking coal contracts traded on the Singapore Exchange, which mirror the free-on-board price in Australia, tumbled to a 3-1/2 year low of $107.97 a tonne on May 1, down 33.3% from the year-to-date peak of $161.99 on March 3.
While the fall in coal prices may have prompted Chinese traders to buy more, it also likely to have been a contributing factor in moves to restrict imports.
Chinese domestic thermal coal prices have also come under pressure, with the benchmark price of the fuel at Qinhuangdao SH-QHA-TRMCOAL dropping to the lowest since August 2016 at the end of April.
The price slumped to 467 yuan ($65.22) a tonne on April 30 and stayed at this level until May 12, when it started to recover, ending at 547 yuan on Wednesday.
This is still lower than the peak so far this year of 573 yuan a tonne in late February, but is back within the range of 520 yuan to 580 yuan that is believed to be the unofficial target preferred by Beijing as it keeps coal mines profitable without raising fuel costs too high for utilities.
Still, the 17% rally in domestic thermal coal prices in China in just over two weeks does raise some interesting possibilities.
The rally was likely driven, at least partly, by the threat of restrictions on imports. Will the threat be sufficient, or will there have to be follow-through to convince the market that the authorities will take action to protect domestic miners?
Editing by Richard Pullin
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