Chinese steel producers seek higher coal import quotas

Economic planners from Hebei province met with private-sector steel producers in north China today to defuse a dispute over remaining coal import quotas for this year held by a small group of steel mills, annoying other buyers unable to clear customs.

Jingtang port has only 2mn t of import quotas left for 2020, far less than the nearly 3mn t of coking coal loaded in vessels queuing at the port. Much of the remaining quotas are controlled by a few mills, which other mills say is unfair. The mills are requesting that vessels queuing be allowed to unload at Jingtang before customs declarations are processed and to increase quota allocations for individual mills.

The mills submitted comments to Hebei representatives of China's main economic planning body the NDRC, which will report back to the central government.

"As to how NDRC will assign additional quotas to each mill, that will be subject to NDRC's approving a review of China's total import quota," a Chinese steel producer said.

China has tightened up restrictions on coal imports amid worsening trade relations with Australia. The main target of the restrictions is thermal coal that China is more self-sufficient in with more than 3bn t/yr output. China relies on coking coal imports to supplement the blend quality of 500mn-600mn t/yr domestic coking coal output.

China's January-July coal imports rose by 6.8pc from a year earlier to 200.09mn t, about 100mn t short of full-year 2019.

"It is hard to say whether the pressure on discharging of vessels will be lifted, but I think overall the import policy will not change unless Australia-China relations improve," an Australian producer said. Even buyers with quotas are finding it hard to get customs to allow a vessel to berth. The wait time at anchorage has increased to 60 days from around 10 days last year, the producer said.

The public hearing could lead to some progress but it is likely only to partial fulfil the requirements of these privately-owned steel mills, a state-owned steel producer said. The NDRC may allow a third or quarter of cargoes to discharge gradually to avoid overwhelming limited storage space at the port, he said.

"However it will be unfair to state-owned mills should all these cargoes be unloaded, given that most privately-owned mills did not comply to the protocol of seaborne cargoes procurement," he said.

The difference this year is also that coal has to stay on vessels for a longer period of time adding to demurrage costs, while in previous years the delay happened after discharge when the coal was sitting in stockpiles for customs clearance, he explained.

A Singapore trader said he is not pinning too many hopes on today's meeting. "It may have raised expectations that something will be done about the import quotas but I think the premium mid-vol trades we saw recently into China were more a function of buyers' interest in procuring cargoes at the current low prices." The Argus premium low-volatile fob Australia index was at $106/t today, the lowest level since July 2016.

Premium low-volatile hard coking coal prices have fallen by 31pc to $117.70/t cfr China since mid-March when Mongolia ended its two-month border closure with China.

By Chris Newman, Dylan Wong, Deepali Sharma