A draft on ‘Ban of low grade thermal Coal Import’ from China’s National Energy Administration was released in the 3rd week of May. This cut in purchase from China may trouble the largest low grade Coal supplier – ‘Indonesia’.
China may ban import of low grade (Net Calorific Value of 4540 Kcal/ kg or less) thermal Coal, which has been a big cause for increasing pollution in China. The ban may have been proposed also to support the local Coal industry. The use of low grade Coal is coughing out more pollution. China is the leading buyer of low grade Coal from Indonesian which has contributed around 50 MnT in the previous year. If thermal Coal of less than 4540 NCV/Kcal thermal Coal import ban is imposed it will directly affect Indonesian market by around 50 MnT.
Steel 360 assessed the impact of the ban:
- It could be catastrophic for prices of Indonesian low rank coal, as Indonesian domestic market is not self sufficient to absorb such big volume
- India may be able to divert this low grade coal further from Indonesia, accordingly Indian import may increase
- Small miners could get affected majorly
- China may spread the volume to other high grade coal producing countries for supplying high grade coal
- Other countries like Vietnam, Philippines etc also have a good chance to import low grade coal at low price
“If China imposes a ban on import of low grade Coal, it will be beneficial for India as the prices of Coal reaching India will see a decline in the range of $3-5/MT. Indonesian miners blend lower grade Coal to 8000 GCV material to bring it to 6200 GCV. In the long run, ban on low grade Coal in China will not have much effect on Indonesia, as India being the second largest buyer can absorb good amount of material. In the short run, it will affect Indonesian miners who have excess stock and they want to dispose off the material before monsoon. Also, it will be good for Coal user industries in India such as Cement, Power and Sponge,” says, Maulik Mehta an Importer based in Ahmedabad.