(Repeats item issued earlier. The opinions expressed here are
those of the author, a columnist for Reuters.)
* Graphic on North Korea's coal exports: tmsnrt.rs/2gBHw6G
By Clyde Russell
LAUNCESTON, Australia, Dec 5 The already
elevated price of coking coal could be boosted further if China
decides to crack down on coal imports from its nuclear-armed
neighbour North Korea.
The United Nations Security Council last week imposed fresh
sanctions on North Korea, limiting its annual coal exports to
7.5 million tonnes, or a value of $400.9 million, after the
isolated communist regime conducted a fifth nuclear weapons
This is significant for China's imports of high-quality coal
used to make steel, as North Korea is one of its top suppliers.
Chinese customs data show that China imported 18.517 million
tonnes of North Korean coal in the first 10 months of the year,
a gain of 12.8 percent on the same period last year.
The jump in imports from North Korea this year came in spite
of earlier Chinese commitments to ban the coal trade with
So far, the official line from Beijing is that China will
meet its obligations under the U.N. Security Council sanctions,
but as was the case earlier this year, it appears the commitment
may not be absolute.
Earlier sanctions banning coal purchases from North Korea
were not enforced by China due to an exemption allowing imports
for what was translated as "the people's well-being," or
China's Foreign Ministry said on Dec. 1 that while it will
enforce the new measures, they aren't intended to harm "normal"
trade with North Korea or impact upon civilians.
"Resolution 2321 formulates new measures, showing the
resolve of the Security Council, and also points out they must
avoid creating adverse consequences for North Korean civilian
and humanitarian needs, and are not intended to create negative
effects on normal trade," Foreign Ministry spokesman Geng Shuang
Once again, it will appear to come down to what Beijing
considers adverse effects on the North Korean populace, and it
seems that the Chinese authorities are leaving themselves some
wiggle room around the sanctions.
BULLISH COKING COAL SIGNAL
Certainly Chinese coal traders will be happy to be allowed
to continue buying from North Korea once the new measures are
put in place in January.
China is believed to be the only country that buys North
Korean coal, which is the biggest export earner for the dynastic
Chinese customs data classifies North Korean coal as
anthracite, which is a grade of coal high in energy content,
making it ideal for use in the steel blast furnaces and ceramic
factories in the northeast provinces close to North Korea.
Russia is the second-largest supplier of anthracite to
China, but its 1.867 million tonnes in the first 10 months is
barely 10 percent of what was imported from North Korea.
Rather, the main import competitor to North Korean
anthracite is coking coal from Australia and Mongolia.
Chinese imports of Australian coking coal were up 11.3
percent in the first 10 months of the year to 23.45 million
tonnes, while those from Mongolia surged 75.3 percent to 17.47
Stronger steel production and a policy directive from
Beijing to limit domestic coal output has combined to send
coking prices sharply higher as China sucked up every available
tonne from the seaborne market.
Coking coal futures on the Dalian Commodity Exchange closed
at 1,276 yuan ($185.46) a tonne on Dec. 2, up 126 percent from
the start of the year.
These gains have been tempered in recent weeks as the
Beijing authorities took actions to try to cool commodity
markets, with exchanges requiring higher margins and charging
Australian coking coal prices ended last week at $308.70 a
tonne, about four times the $77 recorded at the end of last
With coking coal in strong demand in China, the potential
loss of as much as 12 million tonnes of North Korean coal in
2017 would be a very bullish signal for prices.
It's possible that Beijing will force domestic coking coal
miners to ramp up output, and it's also possible that imports
from North Korean won't be cut by as much as implied by the new
But for now, coking coal's extraordinary rally this year has
just been given another reason to continue.
(Editing by Richard Pullin)