Chinese coal traders slow buying over import rules, narrowing spread

Coal traders in China are holding off purchasing from overseas despite the upcoming heating season, as spreads between domestic and seaborne coal prices narrow and import rules tighten at Chinese customs.

Chinese seaborne coal imports fell 18% in October month-on-month to 20.65 million tonnes, and around 13.76 million tonnes are scheduled to arrive in November, vessel-tracking and port data compiled by Refinitiv showed.

Traders and analysts expect coal imports will slow further in coming weeks, even though total coal imports for the year are set to reach a record high.

"There used to be at least 10 shipment enquiries each week for coal imports, but since late October, there have been only two to three," a Shanghai-based chartering manager said.

The bleak trade prospects follow a tightening of import restrictions imposed by several customs authorities, from Guangzhou in the south to Yingkou in the north.

These new regulations ban coal traders from applying for import declarations at customs where they are not registered, said the chartering manager, three traders and one official at Yingkou port.

The sources said they had not been told the reason for the tightening of import rules.

The General Administration of Customs and Yingkou port did not immediately respond to Reuters requests for comment. Guangzhou port authorities declined to comment.

"There are only two months left this year. Why risk buying more coal if customs further tighten the policy?" said a Tangshan-based coal trader, who has stopped importing and is focusing on selling stocks.

China severely limited coal imports in the final two months of last year by halting shipment clearances, curtailing imports of the fuel by 54% in December.

But the official from Yingkou port in the northeastern province of Liaoning expects import curbs this year to be less strict than last year, as Beijing has told local authorities and energy firms to secure coal supplies for winter heating.

Meanwhile, with increasing domestic output, the spread between seaborne coal with energy content of 5,500 kilocalories per kilogramme and Chinese port prices fell to 5 dollars last week from as high as 14 dollars in mid-April and around 10 dollars in mid-September, data compiled by IHS Markit shows.

Average coal inventory at major utilities in coastal regions reached 30 days' worth, higher than the recommended level set by the state planner of 20 days.

(Reporting by Muyu Xu and Shivani Singh; Editing by Dale Hudson)