March 21, 2019 - An increasing number of Chinese ports are holding up Australian coal shipments, with long delays now being reported at Fuzhou port in the southeastern Fujian province, Rizhao in Qingdao and Yingkou in Dalian, according to traders and end-users in China.

The delays indicate that Chinese imports of Australian coal remain constrained, forcing Chinese buyers to increasingly withdraw from Australian thermal coal purchases in the market amid uncertainties.

The price of FOB Newcastle 5,500 kcal/kg NAR with maximum 23% ash product had risen to a high of $63.50/mt in January but has since slumped nearly 12% to be assessed Tuesday at $56/mt amid the China import uncertainties, S&P Global Platts data showed.

In late February, Chinese port officials implemented curbs on Australian coal cargoes at five northeastern ports of Dalian Bay, Bayu Quan, Panjin Port, Dandong, and Beiliang Port, Platts reported earlier.

On March 5 Platts reported the port of Fangcheng in Guangxi province in south China had implemented stricter screening procedures for Australian coal.

However, the clearance process appeared to be shorter in the port of Guangzhou in southern China compared to other ports, some sources said.

"Different ports might have varying degree of delays. It is also likely that some end-users might have communicated with authorities the issues they are facing," a Singapore-based shipping executive said.

The whole screening and custom clearance process could take about 2 to 3 months, but market sources said it remains to be seen how long the delays will last as the policies were only implemented recently.

"It is slow moving at the ports, so it is really likely that the whole process will take that long [2-3 months]," a Chinese buyer of Australian coal said.

Port authorities and customs officials have previously denied issuing verbal directives to specifically ban Australian coal and port officials have also maintained there were no verbal instructions for an outright ban on Australian coal.

However, market sources said the policy was implemented through stricter checks, longer clearances and preventing Australian coal from discharging, with reports of delays from late January.

Among the requirements implemented at the ports, cargo discharge was limited to working days, while "radioactive tests" were conducted for every 500 mt of coal unloaded.

Government Response

"My answer would be the same as what I gave before. In accordance with relevant laws and regulations, the General Administration of Customs of China carries out risk monitoring and analysis on the safety and quality of imported coal and takes corresponding measures for testing and inspection," China's Foreign Ministry spokesman Geng Shuang said, according to an online transcript of a press conference Tuesday.

Geng was responding to a question referring to the Platts report on Fangcheng port's restrictions and other reports that Chinese Customs has been telling ports to take a closer look at Australian coal in the last six weeks.

"It is the bound duty of the Chinese government to safeguard the interest of public safety," he added, without naming coal of any origin.

Australian thermal coal has been "largely forgotten" by Chinese buyers, market sources said Thursday, adding that imported coal such as Indonesian thermal coal had not been subjected to additional testing so far.

Fewer Shipments

Recent shipments from Australia to China have seen a drop, according to port data Platts reported earlier.

Two terminals at Newcastle port in the eastern Australian state of New South Wales had four ships waiting offshore on Sunday. This was a decline from six ships a week earlier and a sharper decline from 13 ships on March 3, just before news of stricter screening surfaced, according to Australia's Port Waratah Coal Services.

"There are domestic substitutes for the high calorific value thermal coal, so Chinese buyers can turn to the domestic market for the cargoes," a source said.

There has been speculation that the policies were implemented on the back of strained bilateral ties between China and Australia, but officials from both countries dismissed the claims, while some said the policies were a way to protect the domestic coal market.

Australian thermal coal suppliers have also diverted their attention to other markets, including India and South Korea to avoid the delays in China, traders from Singapore and Australia told Platts.