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Kallanish Kallanish

Knowledge matters Knowledge matters

January, 29th 2020

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FEB 21
08:58

Coking coal gains on Dalian import ban

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Coking coal futures jumped on Thursday on news that Dalian has banned all imports of Australian coal. Seaborne prices have also increased this week but price movements remain modest compared to the potential disruption at Chinese customs, Kallanish notes.

The port authority of Dalian in northern Liaoning province has reportedly imposed an indefinite ban on all imports of Australian coal. It plans to limit the total import of coal from all sources to 12 million tonnes in 2019. The authority oversees the ports of Dalian, Bayuquan, Panjin, Dandong and Beiliang, and these ports imported some 14mt of coal in 2018.

The measure covers both thermal and coking coal but thermal coal is easier to replace from other destinations. A shortage of high quality Australian coking coal is likely to have an important impact on local steelmakers, especially as imports of Australia coal through other ports is also being delayed (see Kallanish passim). China imported some 28.26mt of coking coal from Australia in 2018.

On globalCOAL on Thursday, 75,000t of hard coking coal sold at $210/tonne fob Australia for April shipment. That was flat from a trade Wednesday and up $5/t from trades last week. On the Dalian Commodity Exchange on Thursday, May coking coal settled CNY 26.5/t higher at CNY 1,285.5/t ($191/t). That was still only CNY 10.5/t higher than before the Lunar New Year holiday and CNY 110.5/t higher than at the end of December.

No official reason has been given for either the slowdown in customs clearance of Australian coal across northern China or the ban in Dalian. Analysts have given various possible causes. Some argue the goal is to support local raw materials prices, in part because a downcycle in producer prices could bring further problems in terms of employment and debt burdens. Other note that Australia has been pushing back against Chinese influence on its politics and has agreed to jointly build a military base with the USA on Papua New Guinea.