China could be ready to deploy its proposed embargo on imports of thermal coal with a calorific value of less than 4,540 kcal/kg on a net-as-received basis, and on thermal coal with a sulfur and ash content of more than 1% and 25% respectively, by as early as next week, some well-informed market sources told Platts Tuesday.
The proposed embargo is the brainchild of China's National Energy Administration, a government agency responsible for crafting national energy strategy, and market sources said the measure is designed to lend support to the Asian country's depressed domestic coal industry which has been beset by falling prices.
However, other sources argued that the policy would have to be implemented in a step-by-step way.
Imported thermal coal with a calorific value of less than 4,540 kcal/kg NAR would fall under the ban, as would thermal coal imports with sulfur of more than 1% and ash or more than 25%, according to sources in the Asian coal market.
China last year imported 65 million mt of thermal coal with an energy value lower than 4,540 kcal/kg NAR which was classified as lignite in Chinese customs data, and almost all of this fuel would fall under the ban if imposed, according to informed market sources.
Most of this lower calorific thermal coal is classed as lignite originated from Indonesia, which has seen its exports of this fuel to China grow from 5 million mt to 50 million mt in just a few years, but China's low cv coal imports last year also included 10 million mt of lignite grade coal from Vietnam, said the sources.
US exports of high sulfur thermal coal to China amounted to 8 million mt last calendar year and could also be vulnerable to China's proposed imports block which sets a maximum limit on sulfur content in imported coal of 1%, said sources in the Asia seaborne market.
Unconfirmed reports were heard in the Asian seaborne market Tuesday of Chinese buyers changing their minds on taking delivery of several cargoes of US thermal coal en route to the country.
By banning lower calorific value thermal coal under 4,540 kcal/kg NAR China would be able to encourage greater consumption by its power stations of domestic fuel and boost prices, said sources.
Market speculation first emerged last week that China's NEA was drafting a ban on imports of lower calorific value, and high ash and sulfur thermal coal and instantly caused widespread panic, particularly among suppliers of Indonesian fuel.
China's proposed import ban is officially designed to address the pressing issue of poor air quality in Chinese cities from burning fossil fuels, although market sources pointed out that many coal-fired power stations in the Asian country were fitted with flue-gas desulfurization equipment to reduce noxious air emissions.
Well-placed market sources said they had been expecting a policy response for some time from China to shore up its coal industry, which has been in the doldrums for many months, but they were surprised by the possible imports ban.
China's coal industry employs a sizeable number of people and low coal prices have put smaller and less efficient mines in danger of shutting down with consequent job losses, said market sources.
Imposing tariffs on certain grades of coal imports was seen by market sources as an unlikely measure as it could lead to China's government falling foul of international free-trade agreements, sources said.
But the policy could pass muster as it has been cloaked in the mantle of environmental reform, they said.
Australian 5,500 kcal/kg NAR thermal coal which has a maximum ash content of 23% was seen as a likely winner if China implemented its ban on low cv thermal coal.
Also, demand for coal-blending capacity in Indonesia might increase as producers there try to circumvent any imports ban by producing blended export cargoes with a calorific value higher than 4,540 kcal/kg NAR, added market sources.
