Coal news and updates

China seeks cleaner coal imports, some Australian miners hit

China will ban the import and local sale of coal with high ash and sulphur content starting from 2015 in a bid to tackle air pollution, with tough
requirements in major coastal cities set to hit Australian miners.

The National Development and Reform Commission policy comes as prices on the GlobalCOAL Newcastle index slump to a five-year low amid a supply glut and slowing demand from China, the world's top importer.

China accounts for about a quarter of Australia's coal exports. It took 54 million tonnes of thermal coal and 30 million tonnes of metallurgical coal from Australia in 2013. All the thermal coal exceeded the new ash limit, while the metallurgical coal was below the limit, according to consultants
Wood Mackenzie.

Under the new regulations, previously reported by Reuters and due to come into effect in January, the government has set different level of requirements on coal grades for mining, local sales and imports.

The most stringent requirements are for cities in the southern Pearl River Delta, the eastern Yangtze River Delta and three northern cities including Beijing, Tianjin and Hebei. These will be banned from burning coal that has more than 16 percent ash and 1 percent sulphur, according to a statement on the NDRC website.

Since the coastal regions such as Guangdong and Zhejiang province are some of China's top coal importers, the regulations are set to block a sizeable amount of imports.

"Coal that does not meet these requirements must not be imported, sold nor transported for long distances," the NDRC said, adding that the customs authority will check the quality of coal imports.

Much of the high ash coal from Australia was developed specifically for the Chinese market and could now be washed to meet the tighter limit on ash, said Rohan Kendall, Wood Mackenzie's metals and mining manager for eastern Asia.

"The uncertainty is whether the Chinese market will be willing to pay a bit extra for that lower ash product from Australia," he said.

Among the larger mines that would not meet restrictions on ash content are BHP Billiton's  Mount Arthur operations, which produce about 16 million tonnes a year, Glencore's Mangoola mine, Rio Tinto's Hunter Valley operations and Bengalla mine, but it was not clear how much of that goes to China.

The Minerals Council of Australia, which represents the coal industry, and Australia's official resources forecaster disputed the view of Chinese traders that the new restrictions would hit Australian exporters hardest.

"There is nothing in the information released to date to suggest that Australian coal exporters will be disadvantaged and we are confident that we can meet the proposed specifications," Minerals Council executive director Greg Evans said in an email to Reuters.

Glencore, the world's biggest thermal coal exporter said it was reviewing the proposed restrictions. BHP, the world's biggest metallurgical coal exporter, which gets about a fifth of its coal revenue from China, said it expects to be able to meet the rules and does not expect a big impact on its business.

Rio Tinto had no immediate comment on the policy.

China will also implement a blanket ban on domestic mining, sale, transportation and imports of coal with ash and sulphur content exceeding 40 percent and 3 percent respectively.

For coal that will be transported more than 600 kms (373 miles) from the production site or receiving ports, the minimum energy requirement was set at 3,940 kcal/kg, with a maximum ash and sulphur content of 20 percent and 1 percent respectively.

When the regulation is implemented, Australian and South African coal with a heating value of 5,500 kcal/kg will be worst hit, since their ash content hovers around 23-25 percent and they contain sulphur of 0.8-1.0 percent, traders have said.

Top steam coal exporter Indonesia, which largely ships fuel with low heating value, sulphur and ash content, will be the least affected.

"It looks unambiguously positive for Indonesia. Almost all of Indonesian coal can meet these limits," Kendall said.

Source: Reuters