China’s ban on Australian coal causes surge in imports from Mongolia, but difficulties remain
- Beijing’s ban on Australian coal has resulted in increasing imports from Mongolia, meaning the country could retake its position as China’s top supplier
- But Chinese users could bear brunt of the Australian ban due to higher costs for alternatives, transport difficulties and a drop in quality
While politics might have played a role in the decision to shut off Australian coking and thermal coal, the practical difficulties in doing without it may force a rethink of the ban over time, analysts said.
Coal from Mongolia, which borders China to the north, is the most obvious replacement for Australian coal, particularly due to the inability of suppliers located further away – such as the United States, Russia and Canada – to meet a short-term increase in demand, S&P Global Platts said in a recent update.
But while users in northern China will largely be able to make the change, those in southern China will find it more difficult to do so because of the logistical difficulty and expense of transporting coal from Mongolia. This is likely to force many to rely on more expensive domestic coal if they can no longer access Australian imports.
The landlocked country has been increasing exports to China and is now sending more than 1,000 trucks a day laden with coal
So far, the ban on Australian coal imports has largely been successful, with coal traders turning to supply from other countries, industry sources said. Due to the lack of cost-effective alternatives, analysts expect demand for Mongolian coal to pick up.