China plans to cut port fees further to boost trade

China's government is planning to cut port fees further for imports and exports to encourage trade in a global economic climate rocked by the Covid-19 pandemic. But the impact on coal may be limited if the government enforces the tighter import quotas it has imposed at many major ports.

No time frame was provided for the port fee reductions, but they will possibly be implemented in gradual phases and will involve around 7bn yuan ($1bn) in cost savings for users of Chinese ports.

Cargo and container throughput at the nation's ports during January-March fell by 4.6pc and 8.5pc respectively against the same period last year, China's transport ministry said, underlining the difficulty of achieving a full economic recovery during a pandemic.

China reduced or suspended some port fees earlier in March for the 1 March-30 June period, which was estimated by some Chinese coal importers to give them savings of about $1/t. The cost savings contributed to more vibrant trading of imported coal in mid-March, despite difficulties with erratic customs clearance policies.

But the coronavirus pandemic has tightened its grip on the world economy since then, drying up global demand for Chinese manufactured goods and taking a toll on China's industrial demand for coal. Intense price competition among coal producers amid an oversupplied Chinese market early in April pushed down prices and reduced the arbitrage for imports of Australian high-ash coal.

Coal importers may be unable to take much advantage of the port fee reduction this time given the implementation of tighter customs policies. South China's Guangdong and some other Chinese coastal provinces have been tightening restrictions on imported coal, citing the exhaustion of 2020 import quota, probably in a bid to protect its oversupplied domestic coal market. A Chinese state-owned utility told Argus on 17 April that it was unable to obtain more import quota share and will have to buy domestic coal.

Combined coal use at China's six flagship coastal utilities remained low at 559,100 t/d yesterday. This will deplete existing stocks within 29 days, which is higher than the 20-25 days that indicate firm coal consumption. Much of China's industries are located along the coast and their success is linked to global demand for Chinese goods.

Source: Argus Media