Even Wood Mackenzie, the energy research firm, was momentarily thrown off balance by coverage of its views which it said “may have been potentially misinterpreted by our subscribers”

Wood Mackenzie has taken the trouble to clarify its position, confirming that not all imported coal to China would satisfy the 16% ash and 1% sulphur limits, including about 80% of Australian high-ash produce (roughly 90 million tonnes).

Australian exporters would be able to change the processing of the coal to meet the ash limit, however the associated increase in cost would “threaten the economics” of these exports.

That said, demand for imported coal would increase as it contained lower ash and sulphur than domestic Chinese coal.

It gets more complicated, with Wood Mackenzie warning there is considerable uncertainty about how the quality restrictions would be applied. Probably, they would affect a large portion of total Chinese import demand, but “if not applied to utility consumption, then the impact would be far less significant”

Wood Mackenzie’s initial report, titled ‘the impact on Australia of Chinese coal quality restrictions’ said there was a possibility sulphur requirements could be relaxed for utilities with desulphurisation equipment, or possibly the guidelines would not apply to utilities at all, and only to industrial and household users.

Another major uncertainty was to what extent and at what locations, “producers and traders will be able to blend coal to meet the new requirements”

Clarification from Beijing is still awaited before implementation at the start of 2015.

Wood Mackenzie named the largest Australian exporters of high-ash coal as Glencore plc, BHP Billiton and Rio Tinto, together representing more than half of the all the high-ash for export.

“All coal currently exported to China can be processed to meet the proposed ash requirements”, said Wood Mackenzie, but there would be a higher processing cost for lower-ash products and it forecast an average cost increase of about $A16/t.

Another question is about what Chinese consumers would be prepared to pay for lower-ash but higher-energy thermal coal from Australia, rather than opt for increased consumption of lower-energy Indonesian thermal coal, most of which meets the new quality thresholds.

The Minerals Council of Australia believes Australian coal exports to China wouldn’t be greatly affected by the proposed regulations. It said the main impact would likely be on brown coal or lignite.

But research published by ANZ bank is less sanguine. According to its commodity strategist Ankit Pahuja, the plan was for more stringent restrictions to be applied to key Chinese population centres and that as much as 30 million tonnes of Australian coal could be hit.

“Tighter restrictions for coal consumed in key centres, including Beijing and Shanghai, may indeed impact seaborne material,” ANZ said.

The game, then, is not over yet. Pahuja makes the point that “the brief announcement from China’s National Development and Reform Commission sets out only high-level points, no doubt expecting a level of renegotiation from domestic producers and importers alike”