China's Caofeidian port in Tangshan, Hebei province, has put a freeze on customs declarations for all imported coal with effect from 16 July, stoking fears that similar restrictions will be placed on other north China ports.
But the freeze is mainly targeted at importers and traders of seaborne thermal and metallurgical coal. Steel mills that wish to undergo customs declaration for met coal through Caofeidian can still do so for now, although some mills are concerned that the freeze may eventually be expanded to include consumers.
Freight forwarders have also informed some of their customers of similar restrictions in Jingtang port, a major Beijing-based trader said. Jingtang port handles the largest amount of coking coal imported into China. "We have not received any details on this, except that customs declaration will not be allowed at Jingtang port with immediate effect," the same trader added.
More importantly, Jingtang port provides an alternative solution for traders to offload cargoes by allowing them to discharge seaborne cargoes and sell them off at portside. Often, portside trades are more profitable for traders as they can charge a premium for small parcel sales and allow buyers to pick up their cargoes immediately.
Reactions from steel producers have been mixed, with some less concerned as consumers are not yet being targeted. Others are concerned about longer waiting times, despite still being allowed to declare their cargoes under current guidelines. "The impact on consumers is more indirect; all these restrictions will inevitably delay our cargoes from being cleared, which will then increase our costs and eventually aim to discourage us from taking imports," a south China steel producer said.
Currently, the time taken for steel producers to clear customs at Bayuquan port in Liaoning province is about 40-45 days compared with about 60 days for traders, a coking coal importer said.
China's coking coal imports increased by 31pc to 29.76mn t in January-May, from 22.66mn t in the same period last year. This jump has compelled the Chinese government to start blocking declarations of coal imports much earlier this year, compared with November last year.
This round of fresh restrictions on imported coal raises the likelihood of prices dropping substantially in an oversupplied market, which is already feeling the effects of a slowdown in European steelmaking this year.
Major Australian producers have been reporting healthy production and have indicated that spot supply should be fairly consistent for the rest of the year, possibly worsening the imbalance.
Argus assessments for premium low-volatile hard coking coal delivered on a fob Australia basis have fallen by 13.4pc since May, with more bearishness in sight amid generally weak demand from major consumer regions.
