April 9, 2019 / 1:10 PM / 12 days ago

China to cap 2019 coal imports to help domestic producers

SHANGHAI (Reuters) - China’s government will cap coal imports this year at 2018 levels, four sources with direct knowledge of the matter told Reuters on Tuesday, to support domestic producers.

FILE PHOTO: Cranes unload coal from a cargo ship at a port in Lianyungang, Jiangsu province, China December 8, 2018. Picture taken December 8, 2018. REUTERS/Stringer/File Photo

The world’s biggest coal consumer imported 281.23 million tonnes of coal in 2018 including thermal coal, coking coal and anthracite.

However, domestic output has also increased and is set to rise by an extra 100 million tonnes this year, an official said on Tuesday.

Three of the sources were told by provincial-level customs officials to restrict their imports in 2019 to no more than 2018 levels. A fourth source, an official with a government-affiliated body who was familiar with the import policy, said the decision was made by China’s State Council.

Shipments from top supplier Australia had already slowed sharply because of lengthy checks at customs.

“Mining companies and provincial governments voiced their opposition against more imports,” said the official, who declined to be identified because of the sensitivity of the matter.

“I was summoned to a meeting organized by customs last month and warned to ‘control the purchase pace of imported coal’,” said one purchase manager at a large steel mill in the eastern province of Jiangsu.

He added that customs plans to break down the 2019 annual quota into monthly volumes.

A purchase manager at another steel mill in Shandong province was also instructed to restrict imports this year.

There was no immediate reply to a faxed request for comment from China’s General Administration of Customs outside business hours. The State Council also did not immediately reply to a request for comment sent outside business hours.

However, the cap is unlikely to curb recent price increases for coal caused by the lengthy customs delays on imports in recent months as well as Chinese safety checks after mining accidents.

The most-active coal contract on the Zhengzhou Commodity Exchange closed at 617.2 yuan ($91.99) a tonne on Tuesday after hitting its highest in five months on Monday.

Spot prices for coal with a heat content of 5,500 kilocalories on Tuesday were at 629 yuan a tonne, well above the 570 yuan a tonne recommended by the state planner.

“The increase in domestic supplies is not able to cool prices,” the official said.

China barely allowed any coal imports in December last year, delaying customs clearances in an effort to meet a 2018 import quota restricting shipments to 2017 levels.

However, total imports rose above the 270.9 million tonnes of coal imported in 2017.

The rising domestic coal prices have pressured profit margins at Chinese coal-fired utilities, industry executives said at the Coaltrans conference in Shanghai on Tuesday..

“Imported coal could be a supplement to domestic coal supply and help to control coal prices,” said Guo Xinyi, director of the fuel department at China Huaneng Group, adding that the 200 million tonnes of annual coal imports cannot be replaced easily.

Chen Bin, deputy chief engineer of the fuel department at China Datang Corp, also said that imported coal has advantages on price, quality and accessibility, especially to utilities located in coastal regions.

“We are planning to sign more long-term contracts with overseas miners,” Chen told Reuters on the sideline of the Coaltrans conference.

Reporting by Muyu Xu, Meng Meng and Dominique Patton; Editing by Christian Schmollinger and David Goodman

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