The Chinese government may extend restrictions on coal imports until the end of February next year, according to market participants. In order to keep imports levels below that of CY17, the government would be mulling a potential extension of import restrictions at ports.
The government-backed China national coal industry association and the general administration of customs have separately agreed to reduce the 2019 import quota from this year’s quota.
However, Chinese authorities have not confirmed the extension.
This move could support domestic coal demand but will disrupt sales of seaborne coal scheduled to reach China in January-February.
China imported 252.04 MnT of coal in Jan’18-Oct’18, according to customs data. The imports were 11% higher than in the same period last year. Imports up to Oct’18 were 18.86 MnT short of the 270.9 MnT imported during all of CY17. This would imply that Chinese non-coking coal buyers can import not more than 19 MnT of coal between Nov’18 and Feb’19.
Major coastal power utilities, including Huaneng, Datang, Guodian and several other utilities were invited to the meeting to discuss coal imports this year. The NDRC and utilities also talked about the use of imported coal and “the implementation of measures to standardise coal imports”, according to a notice issued by the Jiangsu industrial and information technology bureau.
After exhausting their import quotas for CY18, many Chinese utilities had booked their cargoes late in order to avoid being affected by the quota issue. But the proposed extension could keep the door shut for the Dec-Jan arriving cargoes, thereby benefiting the domestic coal producers.
Import demand softens with decline in consumption, Stocks Increasing
Consumption at the six key coastal utilities — Datang, Guodian, Huaneng, Shangdian, Yuedian and Zhejiang Power — continues to remain below historical levels, averaging 500,000 MT/day on 1-13 Nov’18.
This was the lowest level of consumption in the period since at least 2015 and 105,000 MT lower than where they stood in the same period last year.
Because of lower consumption, combined stocks at the six utilities reached a historical high of 17.32 MnT on 11 November, before declining slightly to 17.03 MnT.
Coastal utility coal burn in China typically peaks in the summer, but edges higher towards the end of the year, with coal burn reaching a winter high in December.
Winter temperatures will continue to remain the key factor in determining the Chinese government’s stance on import restrictions this year. And milder temperatures over the next month could rule out the need to import from the seaborne coal market.
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