China to Ban Coal With High Ash, Sulfur
China is the world’s largest consumer of coal, using nearly as much as the rest of the world combined—about 3.5 billion tons a year, according to the China Coal Industry Association. The country imports about 300 million metric tons of coal a year, making it also the world’s largest importer.
In cleaning up its coal resources, Beijing also would be delivering on a pledge to cut coal’s portion of the country’s energy mix to less than 65% by 2017, from around 70% currently. By 2020, the State Council wants coal’s contribution to amount to 60% or less.
While China supplies most of its own coal, Australia and Indonesia account for much of its imports. However, analysts suggest producers in both countries might sidestep the impact of China’s ban.
Indonesian coal exports won’t be impacted because their sulfur content is generally less than 1% and ash content is 5% to 7%, said Bob Kamandanu, head of the Indonesian Coal Mining Association.
Coal-mining companies in Australia said they are still evaluating the impact of the ban. Australia exports at least 49 million tons of thermal coal to China each year, according to Macquarie.
Speculation that a ban was imminent had dragged prices down by 2% in the Australian thermal-coal market over the past two weeks.
“We expect markets to remain oversupplied in , especially if China moves forward with potential import restrictions for sulfur and ash, which would impact almost 50% of all Australian thermal exports,” Nomura analysts said in a note.
Producers may look at ways to blend their coal to ensure they meet China’s cutoff grade. Miners in Australia and Indonesia also argue that India’s rising consumption will offset any decline in Chinese volumes.
“It’s worth remembering that, according to the International Energy Agency, by 2035, 76% of world energy demands will continue to be met by fossil fuels, including high-quality thermal coal,” Whitehaven Coal Chief Executive Paul Flynn said. Whitehaven said it didn’t expect its shipments of the fuel to be curbed.
China’s National Energy Administration last year set tougher limits of 25% ash content and 1% sulfur content on the banned coal types, but state producers successfully lobbied to raise those targets, said Miao Tian, an energy analyst for investment bank North Square Blue Oak. The administration didn’t immediately respond to a call for comment Tuesday.
An earlier Chinese proposal to prohibit coal imports with more than 15% ash and 0.6% sulfur would have hit almost all Australian imports into China, analysts said.
China is trying to consolidate and clean up its coal sector. Late last year, the State Council said it would explore using “differentiated tariffs” to encourage the import of high-quality coal and ban imports of high-ash, high-sulfur coal. China also is pushing its state-owned coal giants to merge, which would increase Beijing’s ability to control small, far-flung producers.
In the latest directive, the commission also imposed more-stringent conditions on coal standards for populated areas such as Beijing, Shanghai and Guangzhou, setting ash content limits at 16% and sulfur content at 1%.
–Deden Sudrajat contributed to this article.