Australia seeks clarity from Beijing on coal import ban

Bloomberg October 13 | Updated on October 13, 2020 Published on October 13, 2020

A miner unloads coal at a storage site in Hefei, Anhui province (file photo)   -  Reuters

China is the top consumer of Australia’s metallurgical coal, accounting for almost a quarter of exports

The Australian government is seeking clarification from Beijing on reports that China has suspended purchases of Australian coal amid heightened diplomatic tensions between the two countries.

Chinese power stations and steel mills have been verbally told to immediately stop using Australian coal, people familiar with the order said Monday, asking not to be identified as the matter is private. Ports have also been told not to offload Australian coal, one of the people said. It isn’t clear when the latest import ban might end or how it might affect long-term contracts that are already in place.

“We are making approaches to Chinese authorities in relation to that speculation,” Trade Minister Simon Birmingham told Sky News on Tuesday. “We take the reports seriously enough certainly to try to seek assurances from Chinese authorities that they are honouring the terms of the China-Australia Free Trade Agreement and their WTO obligations.”

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Chinas customs administration will further strengthen supervision of imports of the relevant products, a spokesman for the body said on Tuesday, while referring a question on the ban to an unspecified competent government department. Newcastle benchmark thermal coal prices fell by the most in almost four years on Monday as reports of the ban filtered through the market.

Escalation in tensions

The ban would mark an escalation in tensions that have already jolted agricultural exports from China’s biggest supplier of commodities. Beijing has objected to a series of diplomatic moves by Canberra that it viewed as supporting the US in its trade and security dispute with China. Among other things, Prime Minister Scott Morrison in April called for independent investigators to be allowed into the Chinese city of Wuhan to probe the origins of the coronavirus.

China is the top consumer of Australia’s metallurgical coal, accounting for almost a quarter of exports, according to the country’s industry department. Export earnings from the steel-making material were already forecast to fall to A$23 billion ($16.6 billion) in the 12 months to June 30 from A$35 billion in the previous year on lower prices and weaker demand, according to a report last month.

The Asian nation is also the No. 2 destination for Australia’s thermal coal exports, behind Japan. Annual exports earnings in that market are projected to slide to A$15 billion from A$20 billion in fiscal 2019.

The fossil fuel has been a previous target for China’s ire with what it regards as an increasingly hostile government in Canberra, most recently in 2019 when shipments became subject to port delays. Thermal coal is one of the few resources in which China is largely self-sufficient.

Higher-quality coking coal is a different story. China produces less of it and the country’s steel-making giants are still dependent on overseas suppliers such as Australia, which typically accounts for over half of imports.

China is also the key buyer of Australia’s most lucrative export, iron ore, although curbs on that product would be a heavy blow to a steel industry that relies on vast — and cheap — supplies from mining heavyweights like Rio Tinto Group and BHP Group.

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Published on October 13, 2020
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