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China’s import ban

Discussed in-depth at the annual conference, with producers hopeful it would not happen some participants convinced that the ban is imminent.

How China’s important ban could affect the Indonesian coal market

Draft Regulations from China’s National Economic Agency had everyone at Coaltrans Asia wondering what the potential affects would be on Indonesia’s coal market

“It is hoped the potential Chinese coal import regulations will not hurt the industry too much,” said Henry Hely Hutchinson, Coaltrans managing director in his opening remarks at the 19th annual conference.

The Draft Regulations from China’s National Economic Agency have not been released publically, but market participants at the conference in Nusa Dua, Bali, were familiar and had seen the legislation.

When first released, the Regulations would prohibit coal imports that had a calorific value (CV) below 4544 net as received (NAR), above 1% sulphur or above 25% ash. David Heap, marketing director of PT Harum Energy shared during the Indonesia producers’ panel at Coaltrans that only one of the thresholds had to apply to the coal for it to be banned.

However, Michael Soerijadji, marketing director of PT Adimitra Baratama shared during the same session that the thresholds have changed to 3050 CV and 2% sulphur or above, with ash remaining the same. Soerijadji said he had received the revised thresholds from speaking with Chinese customers.

Will it happen?

Differing views emerged from many of the speakers and delegates at the conference, who all had an opinion on the whether the Draft Regulations will become effective.

Heap and Soerijadji both believed that the likelihood of the ban happening is highly unlikely. Both came to this conclusion from discussions with Chinese customers.

Sreejith Chalakkal, marketing manager at PT Bayan Resources was undecided but said: “there is a draft in place, there have been high levels of talk, customers and suppliers can speculate and the draft is definitely a hot topic.”

Delegate Bill Sullivan from Christian Teo Purwono & Partners said: “it is clear from the session with Wang Wenyong, CEO of Yunfeng Group, that the import ban is a reality, but it just depends on the final specifications.”

Wang had said at a previous session at the conference that: “if the government wants to carry out the ban, producers will have time to adapt to any changes from the Regulations.”

Sullivan continued to say that even if the ban comes in at very low CV level and does not cause an immediate threat to Indonesian exporters, over time, the threshold would increase and that is when the effects are likely to be felt.

Potential effects

Through the audience response system at Coaltrans Asia, 36% thought that the price for coal below 4544 NAR would drop, while higher quality coal prices will increase as CV importers look for alternatives. Soerijadji agreed with this outcome if the ban became effective.

23% of the audience believed that prices for 4544 NAR coal would drop along with higher quality coal. 22% thought it was too early to say as the Draft Regulations lack details and 19% thought that the Draft Regulations would not become effective.

China purchased 289 million tons of thermal and coking coal in 2012, according to the PRC General Administration of Customs. Around 30 to 40 million tons is provided by Indonesia, which makes it China’s biggest customer for coal.

Indonesia typically provides lower calorific coal than China’s second largest importer, Australia. Market participants have commented that the ban could push Australia into first place for fuelling China’s coal demands. However, this will depend on whether the ban is imposed and at what threshold.

Jero Wacik, Indonesia’s Minister for Energy and Mineral Resources said that the country is not worried about China’s import ban as Indonesia can find alternative markets. “We can still find other markets than China, like India and South Korea,” the Minister said at Coaltrans Asia.

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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