China mills seek resales amid coal import curbs: Update

Adds volume of coking coal being offered for resale in the market.

Chinese steel producers are rushing to find alternative buyers for coking coal cargoes after Beijing clamped down on imports of Australian coal, sending spot prices lower by 6-7pc today.

At least three steel producers in north and south China have reached out to coking coal traders and steel mills in Asia with requests to take cargoes that they booked earlier but now are blocked from importing. As much as 800,000t or 10 cargoes of coking coal are being offered for resale in the market by Chinese mills, estimate market participants.

Prices of premium hard coking coal imported to China fell by $9.90/t to $136/t cfr China today, while the Australian export index for tier 1 coking coal fell by $8.35/t to $125.15/t fob Australia.

The Chinese mills are offering premium low-volatile and premium mid-volatile hard coking coal as well as pulverised coal injection (PCI) supplies. Some of the cargoes have been waiting at the ports of Jingtang and Caofeidian for months since customs declarations for Australian coal started to slow down. The Chinese government first moved to slow arrivals after importers rapidly used up two-thirds of the 2020 import quota by mid-year, but has introduced new curbs in recent days.

No deals have yet been reported by the Chinese mills. Overseas mills eyeing the Chinese offers are intending to secure cargoes, but it can be complicated to change the destination of a cargo that is already on the water, especially if it had been sold on a cfr China basis, market participants said.

"The only way is to seek permission to change the destination from the original seller, and this is only granted at the seller's discretion," an Australian producer said.

The process also depends on what stage the transaction is at. "If the original buyer has already paid the seller for the cargo, all documents required would be ready on hand, and all the original buyer has to do is to transfer ownership to the new buyer and direct the vessel to the new port," a Singapore-based trader said. The original buyer would still have to pay for all additional costs incurred in the process, the trader added.

The Australian government has reached out to the Chinese government to obtain more clarity after large importers were told to stop buying coal from Australia. The curbs appear to be the latest development in the political standoff between the two countries over the past two years, which intensified after Australia backed a call by the US to conduct an inquiry into the origins of the Covid-19 pandemic in Wuhan.

China's seaborne coking coal imports rose by 33pc to 40.1mn t in January-August, despite restrictions on customs clearance imposed throughout this year, as a wide domestic-seaborne arbitrage and manageable demurrage costs drove spot trade.

By Rou Urn Lee, Dylan Wong and Siew Hua Seah