The Asian thermal coal market is cautiously awaiting a decision from China, wondering if Beijing is serious about imposing a ban on imports of low calorific value coal, according to a range of market players interviewed by Platts Monday at the Coaltrans Asia conference in Bali.
One Beijing-based coal buyer said there is talk China may pass a regulation next month regarding a ban on low cv coal and that it may be implemented next year at the earliest.
However, some markets players expressed skepticism about whether China was serious about imposing such a ban.
"No one really knows what China will do but this talk about a ban is dampening price sentiment," a Singapore-based coal trader said.
A managing director for a major producer of Indonesian sub-bituminous coal said his company had no definite word about the proposed China ban. He said though that any such ban would have a "big impact" on the bottom lines of coal mining companies of all sizes.
The producer said selling more coal on the domestic market would not help to offset the loss of tonnage sales if China goes ahead with the ban.
An executive for Indonesian state utility Perusahaan Listrik Negara, Helmi Najamuddin, said his company stands to benefit from a Chinese ban on low cv imports because Indonesian lower cv thermal coal prices would fall.
CLOSE EYE
Indonesia will keep a close eye on any Chinese government announcement on the matter, an Indonesian government official said Monday.
"We are evaluating Chinese policies," said Edi Prasodjo, coal director at the directorate for minerals and coal, which is under the country's Energy and Mineral Resources Ministry, during a presentation at the Bali conference. He did not elaborate.
Several market sources told Platts they were concerned about the likely implications if the Chinese government decided to ban lower cv coal imports.
While some market participants said it was improbable for China to go ahead with such a move, with several Chinese power plants still requiring low cv coal to burn, others were optimistic that even if China implemented the ban, the heating value threshold could be lowered to about 3,700 kcal/kg NAR.
China's National Energy Administration had proposed initially to ban imports of coal with heating value lower than 4,540 kcal/kg NAR coal and any coal with sulfur of more than 1% and moisture level above 25%.
INDIA AWAITING CHINA DECISION
An Indonesia-based trader said Indian buyers were reportedly reluctant to conclude deals for cargoes in larger quantities while they waited for a decision by China over the possible ban.
"They are buying just-in-time cargoes at the moment," he said. The Chinese proposal to ban low cv coal imports has met with stiff resistance from some of the major power producers in China.
Prasodjo said more than 90% of the coal that was available in Indonesia ranged from low to medium cv.
Sources said a ban on low cv coal imports into China would have a significant impact on prices in the near term.
Prasodjo said more Indonesian coal could be used in the domestic market and that 80% of total production in Indonesia is currently used for exports. He said total production in 2013 is expected to touch 400 million mt, up from about 386 million mt in 2012.