China's commerce ministry has delayed issuing import licences for Australian coal and iron ore amid worsening trade relations between the two countries, although the move is likely to have only a limited impact on thermal coal because of reduced Chinese demand.
The issuing of import licences for Australian coal and iron ore now takes 11 days compared with one or two days previously, market participants told Argus.
But the impact on Chinese demand for Australian coal is likely to be limited, at least for the rest of this year, because the market is already muted because of expiring import quotas and delayed customs clearances for Australian coal.
An east China-based state-controlled utility and importer of Australian coal said that it has almost used up its entire import quota for all of 2020. The company plans to postpone any remaining cargoes that it had previously bought through term contracts with Australian producers once its quota expires.
Even without the quota issue, the delayed licensing is unlikely to significantly affect China's imports of Australian coal. Importers can apply for the licences when vessels start to load at Australian ports. As the sailing time is around two weeks, licences should be granted before cargoes arrive at Chinese ports.
China's thermal coal imports from Australia increased by 49pc during January-June compared with a year earlier to 31.59mn t, despite the delays in customs clearances, although Australian coal shipments to China have since started to show signs of weakening. Imports from Queensland during the early part of this month were in line with July when imports reached a 17-month low.
Reduced buying from China has weighed on Australian coal prices. Argus last assessed Australian NAR 5,500 kcal/kg coal prices at $36.17/t fob Newcastle on 7 August, down by 46¢/t on the previous week and the lowest since Argus started to assess the market in February 2012.
