Beijing mulls allocating extra 2020 coal import quotas

Chinese authorities may allocate an additional 20mn t of coal import quotas for this year, according to multiple market participants, to help cope with firmer winter demand and higher domestic prices.

The fresh allocation has not been confirmed by customs authorities but several utilities have started to buy imported cargoes for arrival at Chinese ports before the end of December.

Utilities in east China's Jiangsu province — including plants operated by state-owned utilities Huadian, Guodian and Guoxin — have bought a number of Indonesian cargoes for late November and December delivery. Of the total 20mn t of fresh quotas, 1.7mn-2mn t is likely to be allocated to east China's Jiangsu province, market participants told Argus. The utilities may receive confirmation that the additional quotas will be available soon, they said.

It is uncertain whether the cargoes will be able to be cleared when they arrive, other market participants said. But if not they can wait to be cleared in January when 2021 import quotas will be made available.

The additional quotas will be to cope with peak winter demand and higher domestic coal prices. Domestic NAR 5,500 kcal/kg coal surged to $93.40/t on 20 November, up from $79.88/t on 14 August, according to Argus' assessments.

A number of Chinese regions have exhausted their 2020 import quotas over the past several months, resulting in buyers reducing purchases of seaborne coal.

China's coal imports fell to a 10-month low of 13.73mn t in October, which was down by 47pc compared with the same month last year, customs data show. Chinese imports reached 253.16mn t during January-October, down by 8.3pc from the same period last year and just 46.51mn t short of 2019's annual imports of 299.67mn t.

Purchases by utilities in Jiangsu have lifted prices of Indonesian coal in recent weeks. A utility based in east China's Shanghai municipality bought two Panamax cargoes of NAR 3,800 kcal/kg (GAR 4,200 kcal/kg) Indonesian coal last weekend for December delivery on a cfr basis, which nets back to $30.50-31/t fob. Other supramax cargoes of NAR 3,800 kcal/kg coal were offered as high as $33/t fob for December or January loading.

China's domestic coal market has continued to edge higher this week, despite the potential new quotas for coastal utilities. Bids for NAR 5,500 kcal/kg coal were around 614-616 yuan/t fob ports in north China today, while offers were at Yn618-620/t. Argus last assessed this market at Yn614.42/t fob Qinhuangdao on 20 November.