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Gov't regulations may decrease China's coal imports - BREE

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World Coal,

The Australian Bureau of Resources and Energy Economics and Westpac have released their China Resources Quarterly: southern spring and northern autumn 2014, showing both metallurgical and thermal coal prices remaining weak in response to continued oversupply.

Metallurgical coal

Prices for metallurgical coal prices averages US$123 per tonne – down 0.8% on the previous quarter and 10.3% year-on-year – on the back of “abundant supply and relatively weaker import demand from China”, said the report.

Chinese imports were down 26% compared to Q2 and 31% year-on-year at 13.4 million t with shipments from all regions impacted. Australian imports were down 24% year-on-year, Mongoliam by 13%, Canadian by 34% and Russian by 45%.

The Australian benchmark contract prices for high-quality metallurgical coal delivered in Q4 settled at US$119 per tonne – a US$1 drop on Q3.

Prices were also impacted by the imposition of a 3% tariff on metallurgical coal imports with seaborne sellers reportedly dropping their offer prices to offset the impact of the tax.

Thermal coal

Thermal coal prices were also hit by oversupply, as well as continued uncertainty over the impact of various government regulations. Newcastle prices dropped 6.6% on Q2, QHD prices were down 7.4% and Richards Bay prices dropped 6.4%.

Since September, China has announced measures to restrict the consumption of coal with high ash and sulfur content – particularly in the more heavily populated areas on the Beijing-Tianjin-Hebei Delta, Tangtze River Delta and Pearl River Delta – implemented a tax on coal imports, mandated that Chinese power utilities reduce their import of coal by 50 million t by the end of the year and announced plants to boost efficiency at coal-fired plants (thus reducing coal consumption) and establish a national carbon permit market by 2016.

"These announcements do not necessarily signal a decline in coal use, but may reduce the growth in coal imports over the remainder of the year," the report said. China’s imports (including lignite) were down 18% year-on-year to 49.7 million t with imports from Australian down 2.7% and imports from Indonesia down 23%.

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