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Coal traders rush to exit amid Chinese import controls

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Source: Pixabay, November 7, 2019

Traders in China have been rushing to sell off their coking coal cargoes since last week as reports surface of bans on customs clearance and vessel discharge at ports across China.



A major coking coal trader in China has sold five cargoes of premium low-volatile and premium mid-volatile cargoes since 1 November at progressively lower prices, as it has become apparent that the more prominent buyers in China are less willing to pick up seaborne coking coal with November-loading dates.



Customs officials at various ports — including in Nanning in Guangxi province, Shanghai and Hainan — have halted all customs declarations for coal imports. All other ports in China have also halted customs declarations for coal cargoes, although there are some exceptions on a case-by-case basis, Chinese steel producers said.



But traders have been scouring the country for potential clients to take the remaining cargoes out of their hands. Some relatively rare spot buyers have emerged in Tangshan recently. These buyers are mainly wash plants that are also able to import for their customers and hence have more flexibility to use the cargoes themselves if they encounter problems trying to sell them on.



These Chinese importers in Tangshan have also been opportunistic in trying to take positions recently, expecting Chinese demand for December-loading cargoes to rise as steelmakers eye a reset in import quotas in the new calendar year.



Chinese traders have even been selling to India as the barriers close in on China. A cargo of Peak Downs North for late-November to early-December loading was sold at the end of last week at $126/t fob Australia to an Indian steel producer on a tender basis. Other offers into the tender were similarly competitive in a $128-130/t fob range.



So far, the lowest traded price on a cfr China basis for premium mid-vol is $138/t cfr China for November-loading Peak Downs North and $146.50/t cfr China for November-loading Saraji. The premium low-vol price was especially shocking to market participants, which initially expected better prices given the relatively tighter supply of premium low-vol cargoes.



"Essentially, what these tightening restrictions have done is to snuff out all the remaining outlets for traders to continue their business," a Beijing-based trader said. "The last trade for Saraji was done at $163.50/t cfr just two weeks ago. Prices have fallen by a whopping $20/t since then. It is indeed a very bearish sign."

News Source: Argus Media
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