Advertisement
Advertisement
China-Australia relations
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
Australia is seeking clarification from China on the reported coal ban. Photo: Reuters

Chinese steel mills begin ‘diverting’ Australian coking coal as Canberra seeks clarification on reported ban

  • Australian coking coal ordered by Chinese steel mills is being diverted following a ban by Beijing, analysts say
  • Canberra says it is seeking answers from Chinese government, but stresses China is ‘an important regional partner’

At least four major Chinese steel mills have started diverting orders of Australian coking coal to other countries as a ban on shipments takes effect, analysts said.

Chinese steel mills and state-owned utilities revealed over the weekend Beijing verbally ordered them to stop buying Australian coking coal, as well as thermal coal used in electric power generation.

The Australian government has refused to speculate the ban is a fresh salvo in a broader diplomatic tussle between the two countries, but some analysts have said it is likely politically motivated.

Officials in Canberra have suggested the move could simply be Beijing looking to manage domestic demand.

Nevertheless, Australian producers have been caught by surprise by the turn of events.

07:34

Australia and China cooperation too valuable for 'nonsensical' decoupling

Australia and China cooperation too valuable for 'nonsensical' decoupling

Some 850,000 tonnes of Australian coking coal en route to China on 10 Panamax cargo ships is now being diverted to other markets, said a global coal analyst, who requested anonymity.

The coking coal, a key ingredient in steel production, was ordered by Chinese steel mills in late September.

Chinese customs have also stopped “discharging and clearance” of all Australian coal imports, according to trading sources.

“Clearance has been halted, mainly for Australian coal. We are going to divert it to other markets,” the analyst said he was told by a Chinese steel company.

We’re also consulting, of course, through diplomatic channels with China to seek reassurance that these reports are not accurate
Simon Birmingham

A separate commodity trading source said the September orders were made when prices were “very robust” and when the “steel mills said these cargoes could get clearance”.

Several vessels with Australian coal are currently stranded at Chinese ports, analysts from S&P Global Platts have said.

Australian trade minister Simon Birmingham said on Tuesday the government was trying to get to the bottom of the reported ban.

“We are consulting the Australian coal industry,” he said. “We’re also consulting, of course, through diplomatic channels with China to seek reassurance that these reports are not accurate and that all of the terms of the free trade agreement and world trade obligations between Australia and China are being upheld.”

02:52

How does China generate its energy?

How does China generate its energy?

Birmingham said he did not have evidence to suggest Beijing explicitly ordered Chinese companies to stop buying Australian coal.

“We do know from recent years that there are certain cyclical patterns to the way in which China has managed coal imports, and this may be another case of that,” he said, adding coal exports to China have always “ebbed and flowed”.

Earlier on Tuesday, Australian Prime Minister Scott Morrison said the bans were common in China’s approach to managing its volatile domestic coal industry.

“The arrangements they put around domestic quotas in coal production are not unusual,” he said.

The political relationship between China and Australia has soured since Canberra announced in April it would help coordinate an investigation into the origins of the coronavirus without consulting Beijing.
Some of the decisions that have been taken this year do clearly increase the risk and difficulty for Australian exporters
Simon Birmingham

China has since imposed an anti-dumping duty on Australia barley, suspended beef exports from five Australian abattoirs and initiated anti-dumping and subsidy investigations into cheap Australian wine exports, a market worth A$1 billion (US$721 million) a year.

Birmingham reiterated on Tuesday China remained an “an important regional partner” and the two nations had a “mutually beneficial trading relationship”.

“Some of the decisions that have been taken this year do clearly increase the risk and difficulty for Australian exporters,” he said. “And what we will continue to do is to help our exporters in terms of expanding access to other markets.”

Chinese bans on coal exports from Australia and other producers, including Indonesia, are not uncommon, analysts said.

In February, China suspended Australian coal imports at its northern port of Dalian and in April delayed shipments from Indonesian for around three months.

In the second half of 2019, China regularly tightened coal imports to align supply with demand. Chinese coal is more expensive than imported coal.

Coal imports resumed in 2020 and in May China stepped in again to delay import clearances at ports. Coal import quotas for some Chinese ports have now been exhausted.

China’s Shanxi province embarks on coal mega merger in efficiency drive

Wood Mackenzie, a commodities and energy consultancy, predicted in May that a ban on Australian coal was likely after China’s powerful National Development and Reform Commission asked five major state-owned utilities to stop buying Australian cargo.

“The restriction is targeted at stemming the flow of surging imports into China, in a bid to boost domestic prices,” the firm said.

The annual rate of Chinese coal imports this year is almost 75 million tonnes higher than last year, Wood Mackenzie said.

Australia benefited from China’s economic rebound in the first half of the year, becoming its largest supplier of coking coal, as demand for steel boomed amid a rush of new infrastructure projects.

 

Post