China restricts coking coal imports

China has restricted imports of Australian coking coal at up to a dozen ports in the northeast.

China has restricted imports of Australian coking coal at up to a dozen ports in the northeast in a move that may hamper the ­nation’s biggest export market amid high prices for the raw commodity.

Ports in northeast China have been verbally informed that shipments of Australian coal face lengthy custom delays, although no formal written notifications have yet been divulged by harbour authorities.

Affected sites include those in Dalian, Shantou and Jintang, according to industry sources, with some customs clearances understood to be delayed for up to 40 days ahead of the Chinese New Year holiday.

“Ports in northeast China have been advised that shipments are allowed to be unloaded, but custom clearance will be restricted and prolonged,” a Chinese coal consultancy told The Weekend Australian yesterday.

More than 300 dry-bulk freighters are sitting idle outside Chinese ports, according to Refinitiv data cited by news agency Reuters.

The import restrictions may intensify trade tensions between Australia and its largest trading partner amid speculation “Sino-Australian relations” were ­offered as one reason for the move by Chinese authorities.

Australia last year banned Chinese companies Huawei and ZTE from participating in the rollout of 5G telecommunications infrastructure and controversially rejected Hong Kong-based CKI’s $13 billion bid for gas pipeline giant APA on national interest grounds.

Defence Minister Christopher Pyne this week toughened Australia’s rhetoric on the disputed South China Sea and raised the option of Australian forces joining a freedom of navigation operation. Mr Pyne ­indicated that Canberra might join such operations, contrasting comments by former foreign minister Julie Bishop, who repeatedly made it clear Canberra would not join such an exercise.

About 44 per cent of all China’s coking coal imports are supplied by Australia, with just over 28 million tonnes of the commodity brought from Australian producers last year.

Prices for coking coal, also known as metallurgical coal, have been trading above $US200 a tonne since the turn of the year, with Australia forecast to increase export earnings from the commodity to a record $41bn in 2018-19, from $38bn in 2017-18.

Coking, or metallurgical, coal is used to make steel and is susceptible to big price swings when there are supply disruptions.

“It remains unclear why the ban has been imposed, therefore it is difficult to determine how long it might remain,” Credit ­Suisse analyst Matthew Hope said in a note to clients, citing an industry report that restrictions may have been imposed because the overall volume of coal imported last month by northeast China was greater than expected.

“If that is the case, the restrictions may only last a couple of weeks. However, our China basic material analyst had a different reason that might suggest a longer duration. We don’t know at this stage.”

China imports of Australian coking coal were forecast to remain relatively stable, according to a December update from the Australian government’s commodity forecaster.

“With steel margins falling, winter production cuts and import restrictions, China’s metallurgical coal imports are expected to slow over the last two months of 2018,” the Department of Industry, Innovation and Science said in its last quarterly report.

“However, the possibility of more lenient winter cuts and further stimulatory measures — to offset the impact of the trade tariffs imposed by the US — may provide more support for metallurgical coal imports than anticipated,” the report added.

Australia’s net exports of coal are forecast to increase by 20 per cent by 2040, according to the Queensland Resources Council, while coal earnings from combined coking and thermal coal shipments are set to generate more than $67bn in 2018-19, making it Australia’s largest overall commodity export.