Asia-Pacific coal set to slump on China import restrictions
Asia-Pacific coal prices face further losses as China on Thursday imposed stricter restrictions on imports and the market remained well supplied.
Broker Global Coal’s benchmark Newcastle [Australia] index was last assessed at USD 104.64/t, up by 1.8% from a week ago, but still close to last week’s six-month low of USD 102.84/t.
China’s Zhengzhou front-month thermal coal futures contract settled 1% lower on the week at CNY 616.80/t (USD 88.90/t).
Earlier today, reports emerged that China’s National Development and Reform Commission has placed more stringent restrictions on coal imports until the end of the year, or possibly early February – after the Chinese New Year.
The restrictions were primarily believed to affect the Jiangsu and possibly Guangdong provinces, although some market participants said there would likely be broader implications for the country’s imports.
One Chinese coal analyst said it was currently the “proper time” for the NDRC to introduce such restrictions, given the “relatively relaxed” domestic coal balance in China.
“Sentiment wise, the market it is quite bearish. Current demand is indeed weak in China,” the analyst said, adding however the NDRC could still relax its import restrictions in the coming months, should there be increased coal requirements over the winter period.
Nevertheless, total imports in November and December may reach just 20m tonnes – compared with an average monthly import total of 25m tonnes so far this year – should the policy be strictly adhered to, she said.
Already, one broker said buyers were unwilling to pay any more than USD 63/t for December-loading lower-grade (5,500 kcal/kg) Australian coal, due to the stricter limitations on China’s coal imports.
“China will not return for now,” said a coal analyst with an energy firm, noting low freight rates – and spot prices – meant buyers could source coal from more origins than usual, thereby alleviating any concerns about supply.
“Further improving arbitrages will weigh on coal prices, as more supply will be available inter-basins,” she said.
Montel reported on Wednesday the Baltic Dry Index – which tracks global dry freight rates – had fallen to a six-month low, prompting coal sellers and buyers to seek less common, longer-haul trade routes.
“Chinese import weakness is still present while global supply, and stocks seem plentiful,” said Alfa Energy analysts in a note.
Elsewhere, there were some signs of increased Indian import demand, with stocks at 122 coal-fired plants, monitored by the Central Electricity Authority, rising 10% on the week to a two-month high of 11.3m tonnes.