Shanghai - 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.
China imported about 54 million tonnes of Australian thermal coal and another 13 million tonnes from South Africa in 2013 - most of which would not meet the tightest proposed restrictions on ash and sulphur content.
The policy, previously reported by Reuters, 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.
Under the new regulations, 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 published on the National Development and Reform Commission 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.
Coal from about 28 Australian coal mines would not meet the tighest restrictions, according to data from Morgan Stanley and Wood Mackenzie, however it is unclear how much of that goes to China.
Among the larger operations 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 and Wesfarmers' Curragh mine.
Australia's official resources forecaster, however, said it did not expect the new restrictions to not have much impact on Australia's exports, as most shipments go to southern areas of China that it believed would still take coal with higher ash and sulphur content.
“We don't think it will have a big impact for the Australian producers, based on the data and what we understand of the specifications,” Wayne Calder, deputy executive director of the Bureau of Resources and Energy Economics told Reuters.
“The majority of the coal we export would go into the south. It's not economic for us to export to the north,” he added.
Macquarie analysts said almost half of Australia's coal would not meet the Chinese cut-offs.
“More significantly, we estimate that almost all of the thermal coal Australia ships to China does not fit the cut-off,” Macquarie said.
Glencore, the world's biggest thermal coal exporter, BHP, the world's biggest metallurgical coal exporter, and Rio Tinto had no immediate comment on the new restrictions.
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 for more than 600 kilometres from their 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.
“This new law will hit Australian exporters the hardest. But the 2015 rollout has offered some relief to miners and traders because it gives them some time to come up with a plan to reduce their ash content,” said a Shanghai-based coal trader. - Reuters