Macquarie Bank’s latest research said China’s indefinite import quotas had boosted domestic thermal coal supplies after the sector slowed down last year, giving miners hope the restrictions could soon lift.
“China’s local spot thermal coal prices have lifted over the last two months – unlike those of the seaborne market – supported locally by a slowing in the recovery of its mine supply rate and government-imposed restrictions,” Macquarie sales and trading analysts said.
China-based Wood Mackenzie analyst Nuomin Han said the Chinese government had approved more domestic coal mines, lifting production levels.
A mining industry source close to the issue, who preferred to remain anonymous, said China’s aim was to put its coal sector on the front foot to help boost its broader economy.
“They could be trying to cope with a slowdown in the Chinese economy,” he said.
“When they’re facing slowdowns they fire up their traditional industries to act as a cushion for other sectors.
“Conversations we’re having suggest these restrictions might start to relax by the end of May.”
But he said if China’s economy remains weak into the future then more import restrictions are likely to return as the country props up its coal industry.
“Our guess is that they would hold coal imports around levels seen in 2017 and 2018 to meet their unofficial quotas,” he said.
He said the ratio of Australian coal in these quotas still depended on whether the political relationship with China is mended.
“If the political issues are fixed Australian coal imports will likely be around the same levels, if Australia doesn’t fix the political issues then someone else will profit from our pain,” he said.
China’s economy has faced ‘downward pressure’ even as it recorded an aggressive first quarter growth rate of about 6.4 per cent.
It is expected to drop to an almost 30-year low of 6.2 per cent this year.
“While fully affirming the achievements, we should clearly see that there are still many difficulties and problems in economic operations,” China’s official news agency Xinhua reported.
“The external economic environment is generally tightening and the domestic economy is under downward pressure.”
Miners hopes of an end to import restrictions have also been raised by an increase in Chinese independent, non-state-owned companies buying Australian coal imports for May.
Credit Suisse analysts said this surge in buying may indicate the companies have been given the heads-up by authorities that the informal restrictions may be lifted in May.
Covering energy and policy at Fairfax Media.