China reduces port fees to encourage trade

China's government is suspending or reducing some port fees, a move which is expected to save costs for commodity importers and encourage more international trade as the country recovers from the coronavirus outbreak.

All port construction levies applying to imports and exports will be waived from 1 March to 30 June, while some other port fees, including port security charges, will be reduced by up to 20pc over this period, Chinese premier Li Keqiang said yesterday.

Some Chinese coal importers estimate the port fee waivers and reductions could help them save up to 6.5 yuan/t, or about $1/t.

The change may have limited impact on imported coal demand as market fundamentals remain weak. Combined coal burn at the six main coastal utilities was 476,800 t/d yesterday, which was higher than the January average of 397,000 t/d but still 30pc lower than the 682,200 t/d recorded on the same day in 2019. A large state-controlled utility and at least one other utility had to postpone deliveries of imported coal due for March arrival because of weak power demand, an official from the utility told Argus today.

But coastal utilities' combined coal burn of 476,800 t/d yesterday was the highest since 23 January, which was just before the start of the extended lunar new year break on 24 January. This indicates that China's industries have moved into a slow but steady recovery phase that is expected to pick up speed in late March or early April, in the view of some market participants.

It is also possible that sellers could increase prices to take advantage of the reduced port fees paid by importers, which could nullify any longer-term chance of encouraging trade. Some sellers of Australian coal raised offer prices earlier in January, on expectations that Chinese importers would be less cost sensitive amid softer freight rates and a stronger yuan against the dollar.

The Chinese government's reduction of port fees comes as it grants tariff relief to imports of US petroleum coke as part of attempts to dampen the US-China trade war. The tariff relief is subject to the receipt of applications from coke importers.

China's appetite for coal imports could find some support in late March or early April from cement producers if forecasts by China's cement association on a production recovery prove correct. The Chinese cement industry is a large consumer of thermal coal.

By Kelvin Leong

source: Argus Media