In recent weeks, international media sources reported that the Port of Dalian in the Northeast region of China has allegedly blocked Australian coal from clearing customs. The news sparked speculations and prompted most Chinese traders to stop ordering coal from the land down under. While some reports have cited safety and quality as the reasons for the customs delays, others suggested that diplomatic tensions between the two countries are likely to be a factor. As of this writing, there have been no official statement by Beijing or by the port’s authorities pertaining to the bilateral trade situation concerning Australian coal imports into China. Both governments dismissed allegations about a ban, though industry experts have noted that there appeared to be a noticeable prolonged inspection of Australian coal at the port’s customs.
According to reports, the current clearance time for Australian coal is up to 40-days when it normally takes anywhere between 5 to 20 days. Currently, only coal imports to Dalian have been affected; other ports in China are accepting coal shipments from elsewhere, including Australia. Chinese authorities have confirmed that local customs officials have stepped up efforts to monitor the quality and safety of imported coals in recent years as they reportedly does not meet the environmental standards. While the lengthy inspection implies that Australian coal may have either dropped below the Chinese quality threshold or the standards have become higher, it is important to note that this is not the first time China has put brakes on accepting imported coal. Back in 2017, it restricted Indonesian coal imports for being high in impurities and low in energy efficiency.
Although it remains unclear why the Port of Dalian is the only port with longer clearance time at the moment, precedents show that Chuanshon anchorage at Ningbo Port and Zhoushan LNG Import Terminal near Shanghai have also restricted coal imports in the past. Beijing’s effort to curb air pollution in the heavy industrial zone of the Northeast region comes as no surprise. China’s smog regulatory measures are evident that it is determined to control coal imports for environmental protection as well as to balance out an oversupply of coal in the local market. In November 2018, coal prices dropped one-third when China banned coal imports from around the world until early 2019 due to an oversupply of coal in the domestic market.
With this backdrop, Dalian port authorities have set a cap of 12 million tons for the world’s coal imports for 2019 via its terminals, possibly to slow down the intake. This is a reduction from last year when it handled 14 million tons, with half of the amount being from Australia. Dalian customs accounted for 7 percent for China’s total coal imports, handling both thermal and coking coal in 2018.
Nevertheless, the curb may have limited impact on China’s industrial operations as Chinese steel mills have reportedly built their coal stocks prior to the Lunar New Year. Despite the uncertainties, China continues to be Australia’s biggest trading partner with coal being the topmost exported item to China. Customers with an interest in Chinese industries relying on imported coal are advised to keep abreast of the latest regulatory measures at local ports.