Ships continue to transport coal to China, despite ban on Australian imports

The traders are likely motivated by hope and money, as the cost of the cargoes – even with fees slapped on for failure to unload – is far less than domestic prices

China is also considering accepting cargoes that arrived before the ban, boosting optimism restrictions could ease

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Coal at the Port of Newcastle in New South Wales, Australia. Photo: Bloomberg

Published: 2:00pm, 23 Jan 2021Updated: 2:00pm, 23 Jan 2021

After loading up with coal, the DZ Weihai slipped into the turquoise waters off the coast of Australia earlier this month and began a 14-day voyage to the southern Chinese port of Yangpu. How long the ship waits to discharge its cargo upon arrival is anyone’s guess.

Despite a Chinese ban on coal imports from Australia that has left about 70 ships, 1,400 seafarers and 6.4 million tons of the fuel in offshore limbo, some vessels continue to make the voyage.

While the stranded cargoes and crew are trapped between authorities who won’t let them unload and buyers who won’t let them leave, perhaps most curious of all is what is driving additional shipments.

While mundane matters like contractual commitments play a role, traders are likely motivated by a mixture of hope and money.

China is considering accepting cargoes that arrived before the ban, boosting optimism restrictions could ease. If they do, a windfall awaits as the gap between Chinese and Australian coal prices has widened to a record.

“Chinese buyers with stranded cargoes are reluctant to resell these because the cost of these cargoes is so much less than domestic prices,” said Rory Simington, principal analyst at Wood Mackenzie Ltd. “Even if the cargoes are not released for another six months, the cost including demurrage would still be well below where the domestic prices are currently.”

A single 100,000-ton cargo of coking coal from Australia would cost a trader about US$14 million based on seaborne prices not including transport costs. The same amount bought in the domestic market would be roughly US$28 million. The cost for failure to unload a bulk carrier, known as a demurrage fee, is between US$13,000 and US$17,000 daily.