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China move to restrict coal imports may drive price divergence: Russell

Coal News - Published on Thu, 19 Apr 2018

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Reuters reported that the price of seaborne thermal coal in Asia may come under pressure as China moves to impose some import restrictions on imports of the polluting fuel. Several ports in southern and eastern China have introduced controls on coal imports, ranging from bans on unloadings to tightening customs clearances.

Among ports banning imports is the Chuanshon anchorage at Ningbo port, according to a manager at a coal trading house quoted by Reuters on Monday, while Zhoushan near Shanghai is restricting the number of vessels allowed to dock.

What is not clear yet is just how severe these restrictions are, how widespread they will become and how long they will last.

What does appear somewhat clearer is that the authorities in Beijing wish to restrict growth in coal imports in order to support domestic coal prices and encourage an increase in local production.

Certainly, news of the restrictions boosted domestic prices, with benchmark thermal coal futures on the Zhengzhou Commodity Exchange jumping almost 3 percent on Monday to close at 570.2 yuan (USD 90.94) a tonne.

This was the biggest gain since August last year, although the price is still well below the highest closing price so far this year, which was 678 yuan a tonne reached on Jan 29.

While the authorities don’t officially target domestic coal prices, it’s widely believed in the industry that a range anchored around 550 yuan a tonne is a level that Beijing feels provides miners with sufficient revenue while not unduly boosting costs for power generators.

It’s also currently a price level that makes domestic coal attractive versus seaborne supplies, especially once the duties and taxes on imported coal are taken into account.

The spot thermal coal price at Australia’s Newcastle port closed at USD 93 a tonne on April 16th , up a mere 0.2 % from April 13th 2018’s close.

The price is also down about 15 % from the peak so far this year of USD 109.50 a tonne, reached on Jan 17.

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Posted By : Nanda Koijam on Thu, 19 Apr 2018
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