China imported about 54 million tonnes of Australian thermal coal and another 13 million tonnes from South Africa in 2013 - most of which would not meet the proposed restrictions on ash and sulfur content. [COAL/CN]

The policy, previously reported by Reuters, comes as prices on the GlobalCOAL Newcastle index slump to a five-year low amid a supply glut and slowing demand from China, the world's top importer.

Under the new regulations, to come into effect in January, the government has set different level of requirements on coal grades for mining, local sales and imports.

The most stringent requirements are for cities in the southern Pearl River Delta, the eastern Yangtze River Delta and three northern cities including Beijing, Tianjin and Hebei. These will be banned from burning coal that has more than 16 percent ash and 1 percent sulfur, according to a statement published on the National Development and Reform Commission website.

Since the coastal regions such as Guangdong and Zhejiang province are some of China's top coal importers, the regulations are set to block a sizeable amount of imports.

"Coal that does not meet these requirements must not be imported, sold nor transported for long distances," the NDRC said, adding that the customs authority will check the quality of coal imports.

The government will also implement a blanket ban on domestic mining, sale, transportation and imports of coal with ash and sulfur content exceeding 40 percent and 3 percent respectively.

For coal that will be transported for more than 600 kilometers from their production site or receiving ports, the minimum energy requirement was set at 3,940 kcal/kg, with a maximum ash and sulfur content of 20 percent and 1 percent respectively.

When the regulation is implemented, Australian and South African coal with a heating value of 5,500 kcal/kg will be worst hit, since their ash content hovers around 23-25 percent and they contain sulfur of 0.8-1.0 percent, traders have said.

Top steam coal exporter Indonesia, which largely ships fuel with low heating value, sulfur and ash content, will be the least affected.

"This new law will hit Australian exporters the hardest. But the 2015 rollout has offered some relief to miners and traders because it gives them some time to come up with a plan to reduce their ash content," said a Shanghai-based coal trader.

Below is a table summarizing the latest regulation:

BAN ON OUTPUT, SALES, TRANSPORT AND IMPORTS OF ALL COALS

SPECIFICATION LIGNITE OTHER COALS

Energy NA N.A

Ash ≤30 pct ≤40 pct

Sulfur ≤1.5 pct ≤3 pct

Moisture N.A N.A

RESTRICTIONS ON COAL TRANSPORTED MORE THAN 600km

SPECIFICATION LIGNITE OTHER COALS

Energy (NAR) 3,941 kcal/kg 4,300 kcal/kg

Ash ≤20 pct ≤30 pct

Sulfur ≤1 pct ≤2 pct

RESTRICTIONS ON COAL USE IN COASTAL AREAS, NORTHERN CITIES

SPECIFICATION

Energy (NAR) N.A

Ash ≤16 pct

Sulfur ≤1 pct

(Reporting by Fayen Wong; Editing by Michael Urquhart)