Chinese banks are refusing to issue letters of credit (L/Cs) for coal imports, as they put pressure on China's traders.

The move is part of a general cut in bank lending to coal traders, while the tightening of credit terms is expected to keep coal prices depressed.

Loans recalled

According to local media, some Chinese traders have closed their coal businesses because their banks refuse to provide them with new L/Cs.

In some cases, Chinese banks are also recalling loans from traders.

Depressed prices

Lack of Chinese demand for coal has a negative impact on world prices and particularly affects suppliers in Australia and Indonesia, which provide much of China's coal.

Coal prices have declined by around 20 per cent since the beginning of the year, and weak demand from China is likely to keep prices depressed at under US$90 per tonne.

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