The proposed bans would apply to coals with a c.v. lower than 4,544kc NAR, ash content above 25% and sulphur content above 5%. Most Indonesia’s low c.v. coal miners were only just breaking even with the current spot price of 6,000kc NAR coal at less than US$90/t FOB, the analyst said. China’s proposed import ban would mean even more of these miners would go to wall. Many Indonesian low c.v. producers went out of business last year as global coal prices declined.
“Ultimately the decision would result in the market tightening and produce two differentiated coal markets – a high CV coal market which could see prices rise by US$5-10/t and approach $100/t – and a low CV market,” the analyst said.
A Singapore-based analyst said the proposed bans are working low c.v. producers and if it goes ahead, will play into the hands of Indian buyers. India will remain as the only major market for low c.v. coal and reduced competition would enable Indian buyers to force down prices even further.
The Hong Kong analyst said the import ban is not being promoted because of Chinese government’s environmental concerns about Indonesia’s low c.v. coals, but to protect Chinese domestic coal producers from competition from lower cost imports.
“We think it’s not about the environment but about employment protection,”
“The Chinese producers have been lobbying the government hard for this ban to avoid further production cut-backs because of their higher production costs,” he said.
Indonesian low c.v. coals generally have low ash and low sulphur content and it is the high moisture content that lowers its heat content.
“I think it’s a 50/50 call whether the Chinese will implement the decision,” the analyst said.
What may be a disaster for the Indonesian coal industry coal could be a boon for Australian coal, particularly for the high ash 5,500kc NAR product favoured by Chinese buyers. However, it is still too early to make a firm assessment of the impact of China’s proposed ban on low c.v. coal imports.
“We’re still trying to work out what potential the Chinese low c.v. ban will mean for better quality coals,” New South Wales trader said. “However, there is a school of thought that these coals may see an increase in price because the domestic Chinese coal price is likely to increase due to lack of competing lower c.v. product, which may drag up the high c.v. price with it. This could result in an increase in demand/price for Australian high ash 5,500, although we haven’t seen any change in price or sentiment as yet.”
A Queensland producer of the high ash 5,500kc product, which generally has a maximum ash content of 23%, said he couldn’t see any downside for Australian coal as a result of China’s proposed import ban.
“If it means that a chunk of Indonesian coal cannot be sold in China, then potentially there is a gap there that our 5,500 product can fill,” he said. “Where it starts to get really interesting is, as the Chinese market matures and the environmental regulations become more stringent, they may start to look at some of the lower ash premium coal.”
Another New South Wales trader is sceptical as to whether a Chinese ban on low c.v. imports will have any effect on the demand for Australian coal.
“I don’t think the ban will be as dire for Indonesian producers as everybody is making it out to be,” he said. “They will be able to get around it but blending the low c.v. coal with higher c.v. coals.”
The demand for standard spec Newcastle coal has remained subdued for a number of weeks with no real change in the spot price. Energy Publishing’s NEX Index has been range bound between $87-88/t for the past six weeks.
“We expect this to continue in the short term unless the Chinese decision has some spill-over effect,” the first trader said.
This article first appeared in Inside Coal, a daily publication offering an overview of the major events impacting the international coal industry. More information on the Chinese coal industry can also be found in the McCloskey China Coal Report which presents monthly updates on both the producer and consumer sides of the Chinese coal market. To compliment the monthly report, daily updates are also available via McCloskey China Coal Report Daily. With information on trade, transport and policy updates, the McCloskey China Coal Report provides comprehensive coverage for anyone dealing with the Chinese coal market.
For more information or for a free trial subscription, please contact epi.coalinfo@