China's imports of coal from Australia and Indonesia, its top two suppliers, slumped sharply in February for a second straight month, further evidence that quality inspections that took effect in January are holding back shipments.
Chinese coal imports from Australia, excluding lignite, fell to 5.53 million t in February, down 7.3% from a year before, data released by the customs authority showed.
Imports from Indonesia fell more sharply, dropping to 1.7 million t, down 64.9% from the same month in 2014.
The plunge follows China's move to limit the use of coal with high levels of impurities, a campaign designed to cut smog while propping up local coal producers, huge employers now suffering from a supply glut that has depressed prices.
Uncertainty over the new quality regulations has led some shippers, particularly from Indonesia, to stop sending cargoes to China to avoid costly delays at port, said Michael Elliott, global mining and metals leader at consultants EY.
"If you're a shipper and you can take your coal to some other market, you ship it there," Elliott said.
Australia's biggest metallurgical coal exporter, BHP Billiton, said all of the coal it markets to China is capable of meeting the new regulations using certified international standards.
However, there are questions over China's testing procedures.
"At this early stage of the new regulations implementation, some details relating to Chinese testing processes are still being resolved," a BHP spokeswoman said, adding that the company expects no material impact to its business.
Australia's biggest coal exporter to power stations, Swiss trading giant Glencore Plc , has declined to comment on exports to China.
China, the world's top coal user, has been cracking down on illegal production, suspending new mine approvals while restricting imports by imposing new quality restrictions to support local miners.
At the same time, it is trying to fight pollution from coal-fired power plants, resulting in slower demand growth for coal and adding to a supply glut that is weighing on prices and has driven 70% of China's coal miners into the red.
China's top coal producer, Shenhua Energy Co Ltd , whose profit fell by a fifth last year, plans to cut coal output by 10.8% this year.
The country's No.2 producer, China Coal Energy whose profit slid 96% in 2014, said the country's coal industry faced "grim challenges".
Edited from source by Joseph Green
Source: Thomson Reuters
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