Chinese authorities act swiftly as Jingtang coking coal quota near full; sources

Chinese authorities act swiftly as Jingtang coking coal quota near full; sources

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The annual import quota for seaborne coking coal at China’s major coking coal port, Jingtang has been nearly exhausted and the authorities are temporarily halting customs declarations, sources told S&P Global Platts July 1.

This may have an immediate impact on demand from end-users in Northern China for imported coal because they have been taking advantage of seaborne coking coal being more competitively priced than domestic and buying large volumes.

Market participants added that more than 20 vessels are awaiting to clear customs at Jingtang and there are still vessels en route there, which will quickly eat into the quota left for July-December, resulting in a swift move by the port authorities to control the volumes imported.

“Jingtang is one of the most important coking coal ports in Northern China, almost one-fifth of seaborne cargoes go to Jingtang for port clearance. Since 2020’s import quota is expected to be almost exhausted, I think any potential demand will be diverted to end-users based in Southern or Northeastern China,” a Chinese trader said.

China’s total import volume appears to be well managed at 31.86 million mt for January-May 2020, similar to the same period in 2017. Chinese customs uses 2017’s import volume as the basis for the quota

However, the volume imported from Australia paints a different picture. China imported 21 million of Australian coking coal over January-May, up 67.8% from the same period in 2017. The surge in imports from Australia this year was due to a backlog from the fourth quarter of 2019, which was cleared in January-February, coupled with the relentless procurement of seaborne coking coal by the Chinese in April when spot prices hit multi-year lows.

Jingtang port’s annual import quota for seaborne coking coal is estimated to be around 9.75 million mt, and monthly import quota could vary between 700,000 and 800,000 mt depending on port clearance situation, sources said.

Market participants said that the latest news will discourage any buying interest in the North, and demand for Australian Premium Mid Vol will be adversely affected. “Buyers are expecting PMV prices to move below $110/mt CFR China soon, but grades such as PLV may still remain firm against a backdrop of interest from Northeast China end-users,” a trader said.

Sources also said that import quota at other major ports such as Caofeidian was also being filled up, casting a bleak outlook for coking coal demand for the second half of 2020.
Impact on thermal coal

The latest news from Jingtang port will have a minimal impact on thermal coal imports as most local end-users are steel mills and coking plants, thermal coal market sources in China said.

“Due to Jingtang port’s geographical proximity to thermal coal-rich regions in Northern China, there was no shortage of supply of Chinese domestic thermal coal,” an east China-based trader said.

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