Japanese and South Korean utilities scrambled to get details on China’s move to ban coal exports for the next two months, but said they had been bracing for more bad news following a year of uncertain shipments.
Last year’s faltering Chinese coal exports amid soaring demand and record-high prices had put many big utilities on alert over supplies, forcing them to diversify their sources, although buying back-up supplies has been made more challenging by disruptions to Australian exports due to heavy rains.
“There was a common understanding that China’s exports are declining,” said one trader in Japan. “But it was rather crude to simply put a halt.”
China’s Ministry of Communication told port authorities on Friday to stop exports of coal to help address worsening power shortages ahead of the Chinese New Year, which begins on Feb. 7, and an early-March parliamentary meeting.
Japan, the world’s biggest coal importer that buys some 110 million tons of thermal coal a year, bought about 13 million tons of Chinese thermal coal in 2007, compared with South Korea’s 15-16 million tons and Taiwan’s 13 million tons.
An official at the Japan Coal Development Co Ltd (JCD), which acts as an agent on thermal coal imports from China on behalf of Japanese consumers, told Reuters it was checking China’s announcement and the impact on Japanese companies.
Japan’s major coal buyers are Electric Power Development Co (J-Power) and Chubu Electric Power.
Industry sources in Tokyo said they had not yet spoken with Chinese coal suppliers and that it was not yet clear if those affected cargoes get completely cancelled or they are delayed for later deliveries from April.
Two industry sources in China said coal was still being loaded onto ships at the main port of Qinhuangdao, although only about 20% of the port’s five million tons of stocks were earmarked for export, with the rest for domestic use.
One Tokyo-based trader said supplies promised under a long-standing China-Japan export agreement—estimated at some 400,000 tons or 500,000 tons a month—were likely to be compensated after the ban ends, but other shipments would not.
“The spot cargoes are highly likely to be cancelled,” the trader added.
A source at Korea Midland Power Co. (KOMIPO) said it was not yet clear how much coal would be affected, but that it would seek replacement coal from Australia and Indonesia.
Sources said they expected exports to resume after March but feared the halt would drive up prices just as China and Japan were negotiating to renew their long-term supply contracts for the year starting in April.
Chinese exporters proposed an initial offer of some $103-$108 for their thermal coal supplies to Japan for the year starting in April, to which Japan is not believed to have made a counter bid, sources said. (Reuters)