Dalian tightens coal imports as political row brews

North China's Dalian customs has set a tighter quota for coal imports this year, underscoring the mounting risks for Chinese steel mills in procuring high-grade coking coal from Australia.

Dalian is not a major coking coal entry point for China, but it echoes delays for Australian coal happening at most other Chinese ports as early as end of January.

Dalian set a quota of 12mn t for February-December 2019 for all types of imported coal, market participants said today. China's general customs administration did not release official import figures in 2018. But the 12mn t quota represents a fall from actual imports of 14.9mn t during February-December 2017 into the Dalian customs district, according to customs data.

Although total 2018 import figures have not been released, imports through the Dalian district last year could have been largely stable from 16.9mn t during full-year 2017, because the Chinese government had said it aimed to keep 2018 imports stable against the previous year.

"Anything to do with Australian coal now is considered to be very sensitive, so it is never referred to explicitly in any of the communications that customs hands around," a Chinese port official with knowledge of the matter said. "Officially, authorities indeed want a ban, but we do not know how exactly they intend to carry it out or whether or not it will be possible."

Relations between China and Australia have been strained in recent months over issues including Canberra's decision to restrict investments by Chinese telecommunications firm Huawei.

Some Chinese steel producers are still buying premium low-volatile hard coking coal from Australia because it is difficult to find coal with such quality in China or from any other regions in the world. These steel producers are reporting longer waiting times for customs clearance at Fangcheng and other northeast China ports but have not received news of any ban on Australian coal imports.

But traders have reported that some ports, for instance Jinzhou, seem to have stopped coal vessels from berthing and undergoing customs clearance, although details are not immediately clear, a Shanghai-based coal marketing manager said.

Port clearances of Australian cargoes is expected to take more than 40 days, up from around 20 days previously.

The authority of the Dalian customs district, which governs major customs in Liaoning province, has also set a breakdown of quotas for customs branches, including 6.5mn t for Bayuquan, 3mn t for Dandong, 950,000t for Dalian bay, 750,000t for Panjin and 550,000t for Beiliang.

No other provinces or customs districts are known to have set import quotas for 2019.

Market participants expect actual coal imports to be further squeezed for the rest of this year, as delayed clearing for coal unloaded in late 2018 will account for a significant portion of 2019 imports. China's tightening of import restrictions in November and December last year forced many cargoes to delay customs clearance.

About 2mn t of imported coal, mostly Australian coal, is still waiting to be cleared in the stockpile at Bayuquan, the biggest coal handling port in Liaoning, market participants said.

Customs data for 2017 indicate the thermal coal imports this customs district handled accounted for about 47pc of its total coal imports, with the rest being anthracite and coking coal.

Traders of Australian coal said today they faced an increasingly restrictive environment for sales into China. "Even if a Chinese port is open to Australian imports at present, there is no guarantee it would still accept imports in a few weeks' time," one trader said.