China Coal Import Ban Unlikely on Cost, Indonesian Miners Say
The National Energy Administration’s plan to halt overseas purchases of coal with a relatively low heating value and high sulfur and ash content probably won’t happen, officials from PT Harum Energy (HRUM), PT Permata Energy Resources and PT Adimitra Baratama Nusantara said yesterday in Bali, Indonesia. The officials cited conversations with unidentified customers in China, saying they’re concerned their costs will increase.
As much as 10 percent of Indonesia’s annual coal output may be affected by the rules, according to the Southeast Asian nation’s coal mining association. The country typically produces cheaper grades that have lower calorific value than shipments from countries such as Australia, the second-largest exporter. China, Indonesia’s biggest customer, blends the fuel with higher-grade supplies to reduce costs.
“We have talked with several buyers who said if the ban was in force, it will make their industry uncompetitive,” Aris Munandar, vice president of Permata Energy, which operates two coal mines on Sumatra island, said at the Coaltrans conference in Bali. “I don’t think the ban will be implemented because the coal industry is still in consolidation. It’ll be very difficult if there’s such a limitation.”
Zeng Yachuan, a spokesman for the NEA, didn’t answer two phone calls to his office seeking comment on the proposal today.
China may ban purchases of coal with a heating value below about 4,540 kilocalories a kilogram on a net-as-received basis, sulfur content above 1 percent and ash above 25 percent, the draft NEA regulation obtained by Bloomberg News shows. It doesn’t specify when the ban would be implemented. The standards may be eased, Australia & New Zealand Banking Group Ltd. (ANZ) said in a note today.
Indonesia’s reference price for the fuel with 4,200 kilocalories a kilogram was at $45.98 a metric ton as of May. Thermal coal with a heating value of 5,500 kilocalories per kilogram at Qinhuangdao, the benchmark grade for China, fell as low as 600 yuan ($97.91) as of June 2, the least since October 2009, according to data from the China Coal Transport & Distribution Association.
Coal at the Australian port of Newcastle, which has a heating value typically higher than 6,000 kilocalories per kilogram and sets the marker price for Asia, was at $86.80 a ton as of May 31, according to figures from IHS McCloskey in Petersfield, England.
China bought 289 million tons of thermal and steelmaking coal from overseas in 2012, data from the customs bureau in Beijing show. About 50 million tons of imports will fail to meet the NEA’s proposed criteria, according to estimates by Sanford C. Bernstein & Co. and Haitong International Securities Ltd.
Indonesia supplies 30 million to 40 million tons a year of coal with a lower heating value to China, Bob Kamandanu, the chairman of the coal mining association, said in an interview in Jakarta last week. Total Indonesian output this year will be 390 million tons, down from an earlier forecast of 400 million, he predicted.
“The likelihood of this ban happening, based on our conversation with our Chinese customers, is highly unlikely,” Michael Soerijadji, Adimitra Baratama’s marketing director, said at the conference. “If it does happen, the most likely outcome would be the low calorific value price will drop and high calorific will increase. We also heard talks about the rejection limit being lowered.”
The Beijing-based NEA reduced the proposed minimum heating value for coal imports and introduced different standards for three categories of the fuel, Melbourne-based ANZ Bank said in its report, without stating where it got the information. Lignite would require a heating value of at least 3,940 kilocalories per kilogram on a net-as-received basis, anthracite was set at 5,000 and bituminous coal at 4,300, the bank said.
“It won’t happen,” David Heap, Jakarta-based Harum Energy’s marketing director, said at the conference, referring to the proposed ban. “All customers we have spoken to agree.”
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