China’s Jiangsu, Zhejiang, Fujian and a few other provinces have gradually relaxed the customs clearance norms on imported coal in an attempt to curb the surge in domestic thermal coal prices that are up by 20% against Dec’20 levels, according to market sources.
Measures undertaken-
While a few provinces have announced that coal imported before the end of Jun’21 may not be included in the annual quota, some customs authorities have informed importers that they do not need to use their 2021 import quotas for bringing coal into Zhejiang and Jiangsu provinces this month.
Many customs authorities such as Huangpu in south China have put a quarterly limit on coal imports, as the Chinese government typically seeks to cap annual imports at levels no higher than the previous year’s. Authorities in Huangpu, for instance, have set a limit of around 3 million tonnes (mn t) for coal imports in Apr-Jun’21, according to market participants.
The current actual import volume will be approved for next year. The news has attracted the attention of all parties in the market.
What happened in the past?
Prior to this, local customs often controlled the pace of imports based on quarterly quotas. In the first quarter of 2020, customs clearance restrictions were relatively loose whereas after 1 May’20, the authorities tightened the declaration conditions. Around mid-May, the customs quotas for coal imports of the second quarter were almost used up. In the third and fourth quarters, the strict import quota rules continued, making China less dependent on imported coal.
Imported coal prices likely to rise
The Indonesian 5,800 GAR coal prices are currently assessed at $91/t, FoB up 11% against Jan’21 prices. Australian 6,000 NAR coal prices touched two-years high at 125/t. South African RB1 prices (6,000 NAR) are also trending at $116/t, up by 29% against Jan’21 prices, and very close to all-time high levels of $120/t. Russian 6,000 NAR prices are ruling at $113/t, FoB, up from the lows of $47/t last year.
However, with China relaxing import quotas, these prices are likely to see a further increase due to the following factors:
• Absence of Australian coal in China, making the country source coals of other-origins in huge volumes.
• Increasing demand for thermal coal from South Korea, Japan, and especially Taiwan since the last two weeks due to power outages (that has compelled the country to buy coal at any cost).
• Countries like India, Pakistan, and Vietnam are also increasing purchases amidst revival of industrial and economic activities the post-2020 pandemic.
• Continuous rainfall in Indonesia restricting supplies from the country
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