Given the growing concern over air pollution in major cities along the Chinese seaboard, and the current reliance on coal-burning power stations, it may come as no surprise that wide-ranging quality restrictions on coal, including imported bulk coal, have been jointly announced by six ministerial departments, headed by the National Development and Reform Commission.

The announcement of the Provisional Measures on Quality Management of Commercial Coal (商品煤质量管理暂行办法) on 15 September 2014 has the potential to force significant change among the international mining community, with limits placed on ash and sulphur content, alongside other specifications.

General provisions

This new legislation sets limits to the following elements of commercial coal generally, where commercial coal refers to those coal products that will be sold within China, including coal subject to long-distance transportation for an enterprise’s own use.

Ash content and sulphur content are particularly heavily legislated against. The general restriction specifies that brown or lignite coal must contain ash and sulphur content below 30% and 1.5% respectively. For all other coal this limit is raised to 40% and 3% respectively.

In addition to the above, Mercury levels must not exceed 0.6μg/g, Arsenic 80μg/g, Fluorine 200μg/g, Phosphorus 0.15% and Chlorine 0.3%.

However, it is clear that these limits remain an absolute maximum and the National Development and Reform Commission has tightened restrictions further for two important categories.

Coal transported more than 600km within China

The Commission has defined this distance as the distance from point of origin within China to point of consumption, or for imports, from port of arrival to point of consumption. Such products may not exceed 20% ash and 1% sulphur for brown or lignite coal, and 30% ash and 2% sulphur for other coal. These grades of coal must also maintain a minimum calorific content, specifically, greater than 16.5MJ/kg for brown or lignite coal and greater than 18MJ/kg for other coal.

Bulk coal

Bulk coal faces even further restriction if delivered within the areas surrounding Beijing, Shanghai or Guangzhou. Restrictions will apply to coal with ash content over 16% and sulphur content over 1%.

Importantly, the wording of the legislation does not suggest a general prohibition on coal exceeding these margins. This may reflect a pragmatic approach on the part of the government as such widespread change cannot be achieved overnight. It is anticipated that the government will adopt limits over the aggregate quantity of the ‘off-specification’ coal supplied in these areas, with the underlying intention of decreasing quantities of such supplies over time. However, the terms under which avoidance of such restrictions could be permitted, such as initial aggregate quantities, are yet to be announced.

Similarly, of importance for chemical manufacturers and power plants, there appears to be potential relaxation of limits on sulphur levels where users have appropriate desulphurisation, waste disposal or recycling facilities available. Again, details of such relaxations will follow further consultation and are yet to be announced.

Duty to self-regulate

The enforcement of the legislation is delegated to the coal administration departments and other relevant departments, who will supervise those businesses engaged in the production, processing, storage, sale, importation or use of coal. All such businesses are liable to be inspected randomly to test coal quality, including on entry at any relevant port.

However, the legislation also places the onus on businesses, whether seller, shipper, importer or end user, to maintain accurate quality records, to ship coal of different grades in isolation to prevent mixing, and to maintain quality in line with the standards set out in Commercial Coal Marking (GB/T25209-2010), which are China’s national standards in this area.

Implementation date

Currently, these limits will come into force with the legislation itself on 1 January 2015. Despite being titled a provisional measure, we understand that the legislation will remain in effect for some years to come, although it is hard to predict exactly how long it will remain in force. It is not uncommon in China for ‘provisional’ legislation to be in force for a good number of years.

Even once fully announced, we expect a time lag while such measures are brought into full force and we expect implementation during the early stages to vary from place to place.

While clearly a shot across the bows of coal importers, and cause for consideration, the exact level of detailed regulations to be enacted is not yet clear. Certainly there are defined upper limits for the quality of imported coal; however, where restriction rather than prohibition is called for, namely in the use of bulk coal around major cities, details are conspicuously absent. In the interim we await further updates from the Commission and the five ministerial departments with which it is collaborating.