September 16, 2014 / 2:02 AM / 6 years ago

CORRECTED-UPDATE 4-China seeks cleaner coal imports, some Australian miners hit

(Corrects paragraph 3 to say thermal coal exceeded ash limit)
    By Fayen Wong
    SHANGHAI, Sept 16 (Reuters) - China will ban the import and
local sale of coal with high ash and sulphur content starting
from 2015 in a bid to tackle air pollution, with tough
requirements in major coastal cities set to hit Australian
miners. 
    The National Development and Reform Commission policy comes
as prices on the GlobalCOAL Newcastle index slump
to a five-year low amid a supply glut and slowing demand from
China, the world's top importer. 
    China accounts for about a quarter of Australia's coal
exports. It took 54 million tonnes of thermal coal and 30
million tonnes of metallurgical coal from Australia in 2013. All
the thermal coal exceeded the new ash limit, while the
metallurgical coal was below the limit, according to consultants
Wood Mackenzie. 
    Under the new regulations, previously reported by Reuters
and due to come into effect in January, the government has set
different level of requirements on coal grades for mining, local
sales and imports.
    The most stringent requirements are for cities in the
southern Pearl River Delta, the eastern Yangtze River Delta and
three northern cities including Beijing, Tianjin and Hebei.
These will be banned from burning coal that has more than 16
percent ash and 1 percent sulphur, according to a statement on
the NDRC website.
    Since the coastal regions such as Guangdong and Zhejiang
province are some of China's top coal importers, the regulations
are set to block a sizeable amount of imports.
    "Coal that does not meet these requirements must not be
imported, sold nor transported for long distances," the NDRC
said, adding that the customs authority will check the quality
of coal imports.
    Much of the high ash coal from Australia was developed
specifically for the Chinese market and could now be washed to
meet the tighter limit on ash, said Rohan Kendall, Wood
Mackenzie's metals and mining manager for eastern Asia.
    "The uncertainty is whether the Chinese market will be
willing to pay a bit extra for that lower ash product from
Australia," he said.
    Among the larger mines that would not meet restrictions on
ash content are BHP Billiton's  Mount Arthur
operations, which produce about 16 million tonnes a year,
Glencore's Mangoola mine, Rio Tinto's  
Hunter Valley operations and Bengalla mine, but it was not clear
how much of that goes to China.
    The Minerals Council of Australia, which represents the coal
industry, and Australia's official resources forecaster disputed
the view of Chinese traders that the new restrictions would hit
Australian exporters hardest.
    "There is nothing in the information released to date to
suggest that Australian coal exporters will be disadvantaged and
we are confident that we can meet the proposed specifications,"
Minerals Council executive director Greg Evans said in an email
to Reuters.
    Glencore, the world's biggest thermal coal exporter said it
was reviewing the proposed restrictions. BHP, the world's
biggest metallurgical coal exporter, which gets about a fifth of
its coal revenue from China, said it expects to be able to meet
the rules and does not expect a big impact on its business.
    Rio Tinto had no immediate comment on the policy.
    China will also implement a blanket ban on domestic mining,
sale, transportation and imports of coal with ash and sulphur
content exceeding 40 percent and 3 percent respectively. 
    For coal that will be transported more than 600 kms (373
miles) from the production site or receiving ports, the minimum
energy requirement was set at 3,940 kcal/kg, with a maximum ash
and sulphur content of 20 percent and 1 percent respectively.
    When the regulation is implemented, Australian and South
African coal with a heating value of 5,500 kcal/kg will be worst
hit, since their ash content hovers around 23-25 percent and
they contain sulphur of 0.8-1.0 percent, traders have said.
    Top steam coal exporter Indonesia, which largely ships fuel
with low heating value, sulphur and ash content, will be the
least affected.
    "It looks unambiguously positive for Indonesia. Almost all
of Indonesian coal can meet these limits," Kendall said.
        
 Below is a table summarising the latest regulation:
    
 BAN ON OUTPUT, SALES, TRANSPORT AND IMPORTS OF ALL COALS
 SPECIFICATION       LIGNITE             OTHER COALS
 Energy              NA                  N.A
 Ash                 30 pct             40 pct
 Sulphur             1.5 pct            3 pct
 Moisture            N.A                 N.A
 RESTRICTIONS ON COAL TRANSPORTED MORE THAN 600km 
 SPECIFICATION      LIGNITE              OTHER COALS
 Energy (NAR)       3,941 kcal/kg        4,300 kcal/kg
                                         
 Ash                20 pct              30 pct
 Sulphur            1 pct               2 pct
 RESTRICTIONS ON COAL USE IN COASTAL AREAS, NORTHERN CITIES    
 SPECIFICATION     
 Energy (NAR)      N.A
                   
 Ash               16 pct
 Sulphur           1 pct
 For more details, click on: here

 (Additional reporting by Sonali Paul in MELBOURNE; Editing by
Michael Urquhart and Richard Pullin)
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