Oct 15, 2020

Much bluster in China coal trade storm

Much bluster in China coal trade storm

A feared block on Australian coal imports may prove ‘more bark than bite’ on China’s part, according to one resource analyst.

After sluggish customs clearances for Australian coal recently, there have been reports that Chinese authorities have verbally communicated a ban on Australian thermal and coking coal imports amid strained trade relations between the two nations.

And the South China Morning Post yesterday reported that at least four major Chinese steel mills had started diverting orders of Australian coking coal to other countries as a ban on shipments took effect.

MineLife founding director and senior resource analyst Gavin Wendt said the situation involving reports of potential obstacles to Australian coal exports was nothing new.

During the first half of this year there was much speculation regarding reports of Chinese authorities deliberately slowing the unloading of Australian thermal coal imports within China, he said.

“The situation then and now, seems to be more bark than bite on behalf of China,” he said.

“What I mean by that is that China realises the importance of the trade relationship between itself and Australia, and doesn’t necessarily want to take direct actions that would harm that relationship, despite the somewhat belligerent rhetoric.”

Mr Wendt said most Chinese thermal coal importers had already exhausted their import quotas for the year during the month of September, so any proposed import restrictions were more symbolic than anything.

“Furthermore, China wouldn’t want to leave itself open to any accusations of anti-competitive behaviour by the WTO,” he said.

“Australia is a major supplier of low-emission thermal coal to China, which is an important factor in minimising emissions in its coal-fired power stations.

“At the same time, Australia is also a major supplier of high-quality coking coal for use in China’s steel industry, which helps maintain production efficiency and minimise emissions and waste.

“Coking coal, along with iron ore, has formed a major component of China’s post-COVID industrial recovery, in terms of allowing it to boost steel production.

“I don’t believe China would want to damage the strong trade relationship between itself and Australia, in terms of the major mineral exports that it requires.”