China’s imports of Australian coal unlikely to rebound amid high prices, security risks: analysts
- China has ramped up domestic production since the 2020 ban, with high import prices and geopolitical risks also deterring traders from making long-term deals
- Optimism about a big return in Australian imports is low, analysts note, with thermal coal sales to China entering ‘a period of structural decline’
China imposed restrictions on Australian coal imports following a bilateral fallout in 2020, but lifted them earlier this year amid improving relations.
In that time, China ramped up thermal coal production – used for power generation – resulting in a large domestic stockpile which would discourage more imports of Australian thermal coal, said data analyst S&P Global Market Intelligence.
Prices of Australian coking coal – which China buys for steel making – were also too high compared with those of local coking coal and stock from neighbouring suppliers such as Mongolia, it added.
Even though Chinese steelmakers prefer higher-grade Australian coking coal, they would rather wait for prices to fall further, according to analysts at S&P Global Commodity Insights.
Chinese analyst SX Coal said last week in a note that optimism about a big return in Australian imports was low, with Chinese end users and dealers avoiding trading amid high Australian prices.
Chinese buyers were also more cautious about signing long-term deals with Australian miners than they were two years ago because of geopolitical risks, Yang Jie, a coal analyst with information provider YiMei Net, told S&P Global Commodity Insights.
So far, following the lifting of restrictions in January, a total of 38 cargoes carrying 3.1 million tonnes of Australian coal – mostly thermal – had arrived in China in the first quarter of the year, while another 2.8 million tonnes were in transit, data from S&P Global Commodities at Sea showed.