China planning to step up controls on coal imports — report

China planning to step up controls on coal imports — report

According to consultancy Wood Mackenzie 85% of Chinese thermal coal producers and 35% of metallurgical miners are now running at a cash loss. (Image from archives)

Australia’s beleaguered coal sector, already hit by a slump in the price of the commodity and China’s slowdown, may now have to also face tougher import restrictions from the world’s largest consumer of the fossil fuel.

Speaking at a conference in Sydney, Wood Mackenzie senior coal analyst Robin Griffin said given the current status of China’s local coal industry, “there was a great risk that the government will institute even more strict policies and restrictions on imported coal.”

This is only bad news for Australia, since coal is the country’s second-largest export after iron ore.

Griffin noted, The Australian Financial Review reports, that 85% of Chinese thermal coal producers and 35% of miners focused on the metallurgical kind are now running at a cash loss.

Beijing has already taken steps to protect its local industry. Earlier this year it imposed coal-quality tests on imports that have severely impacted the already struggling Australian exporters.

More than 4,000 Aussies have lost their coal jobs in the past two years as prices for both thermal and metallurgical coal have fallen to multi-year lows.

Glencore (LON:GLEN), one of Australia’s biggest miners, late last year estimated that up to a third of the country’s coal sector was running at a loss.

Since then coal prices have only worsened.

Government intervention

In an effort to help the ailing sector, Canberra has made representations to Beijing about the new quality tests, which ban the burning of coal with ash content of more than 16% or sulphur content of more than 1%. No changes have come out of these negotiations so far.

On top of the restrictions, Australian coal producers are being crushed by an import tariff of between 3% and 6% imposed in October last year, though that will be gradually abolished once the China Australia Free Trade Agreement comes into effect early 2016.

Australian miners invested heavily in their thermal coal operations over the past decade to meet China’s apparently limitless demand for energy to power its economy. But as the Asian giant’s growth cools and Beijing cracks down on pollution and carbon dioxide emissions, the global industry faces a supply glut, which has caused prices to halve from their peak in 2011.