AUSTRALIAN coal exporters are scrambling to clarify the fallout from changes to China’s coal import rules, which could expose the industry to billions of dollars in lost sales as China seeks to cut air pollution.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The Chinese government is to limit the use of imported coal with more than 16per cent ash and 3per cent sulphur from January 1, 2015 in a bid to improve air quality, especially in cities such as Beijing and around Shanghai.
At the same time, China is moving to force power utilities to slash coal import volumes, also with the stated aim of improving air quality, although it will primarily give China’s local coalminers a lift.
According to an analysis by Macquarie Bank, consultant Wood Mackenzie has indicated the ban could affect more than half of Australia’s thermal coal exports to China, although the ban is also likely to hit Indonesian coal.
‘‘We are all trying to sort out what is going on,’’ one large coal exporter said.
‘‘The information has been fairly fluid. I’m not sure what the endgame is beyond driving more domestic production.’’
The Minerals Council of Australia said exporters could adapt to the changes.
As much as a quarter of all coal shipped through Newcastle goes to China, up from less than 10 per cent a few years ago. Coal shipped through the port – the largest coal export port in the world – is running at around 170 million tonnes a year.
Australia exports an estimated 49million tonnes of thermal coal a year to China, and a large part of this could be at risk with the ban.
Industry sources said the Chinese government moves were aimed at propping up its domestic coalminers as well as assisting its power generators amid the slowdown.
Part of the measures disclosed yesterday include slashing China’s coal import volumes by 50million tonnes over the balance of this year alone, which could hit the Australian industry hard, they said.
‘‘Both the miners and the power companies are doing it hard in the slowdown, and the measures are aimed at giving both some room to manoeuvre,’’ one industry source said.
‘‘[Australian coal exports are] typically around 5500 kilocalories and 24 to 25per cent ash. So we’ve got big problems,’’ Bruce Jacques of IHS McCloskey Coal said.
Some coal producers may be able to reduce the level of ash by washing the coal, but this involved extra cost and many producers would be unwilling to pursue this option, he said.
‘‘It is a quality and a quantity approach,’’ Mr Jacques said of the new controls.
‘‘If one doesn’t get you the other will.’’
Australian exporters had been wary before the decision to impose the ban, since it appears to apply irrespective of the energy value of the coal, and gives exporters of low-energy coals such as lignite a free kick.
The Minerals Council of Australia said there was nothing in the information ‘‘to suggest that Australian coal exporters will be disadvantaged and we are confident that we can meet the proposed specifications.’’