The Australian government is seeking clarification from Beijing over reports thatChinahas suspended coal imports amid escalating diplomatic tensions between the two countries.
According to sources close to the matter, China’s power plants and steel mills have been verbally ordered to stop using Australian coal.
The port has also been told not to unload Australian coal.It is unclear when the latest import ban will end or how it could affect existing long-term contracts.
“We are currently approaching the Chinese authorities regarding this speculation,” Trade Minister Simon Birmingham, reported byBloomberg,Tuesday (13/10/2020).
He continued that the Australian Government is serious enough to take the report to ensure Beijing respects the China-Australia free trade agreement and adheres to the rules of the World Trade Organization or WTO.
The ban will mark escalating tensions that have roiled agricultural exports from China’s biggest commodity supplier.Beijing has rejected a series of diplomatic moves by Canberra that it views as supporting the United States in its trade and security dispute with China.
Prime Minister Scott Morrison in April asked that independent investigators be allowed into the Chinese city of Wuhan to research the origins of the coronavirus.
China is the main consumer of Australian metallurgical coal, accounting for nearly a quarter of exports.Export revenues from steelmaking materials are expected to fall to 23 billion Australian dollars (US $ 16.6 billion) in the 12 months to 30 June from 35 billion Australian dollars the previous year due to lower prices and weaker demand.
China isalso the number two destination for Australian thermal coal exports after Japan.Annual export revenue in the market is projected to fall to $ 15 billion from $ 20 billion in fiscal 2019.
Fossil fuel imports have been a target of China’s anger at Canberra’s hostile stance.Last year the shipment experienced delays at the port.
Thermal coal is one of the few resources that are largely a source of China’s self-sufficiency.Another case with high-quality coking coal.China produces less and the country’s steelmaking giants still rely on overseas suppliers such as Australia, which typically accounts for more than half of imports.
“China increasingly relies on high-quality coking coal for its steel industry, to maximize efficiency as well as reduce emissions,” said Gavin Wendt, senior resources analyst at consultancy MineLife.
He continued, Australia supplies the highest quality coking coal and is a reliable supplier at low cost.
“The two sides are very dependent on each other, so I think there are more unpleasant things in this situation,” he said.
The price of benchmark Newcastle thermal coal fell the most in nearly four years yesterday as reports of the ban spread across the market.Australian coking coal prices also fell more than 5 percent, the most since May.Several major Australian coal producers have also taken a hit, stakes in Whitehaven Coal Ltd.and New Hope Corp.down more than 6 percent today.
“Trade with China changes throughout the year based on a number of factors, including quotas. Australia will continue to see demand for high-quality coal and the medium-term outlook remains positive,” said Tania Constable, chief executive of the Minerals Council of Australia industry group.
China continues to have a grip on coal imports as it seeks to balance the needs of miners and industrial users.On the other hand, the Australian government has anticipated a slowdown in shipments, given the strong volume of imports China took in in the first half of this year.
“The volume of Chinese metallurgical coal imports in the second half of 2020 could be limited by a slower customs clearance process,” said the Ministry of Industry, Science, Energy, and Resources, in a quarterly report in September.
China is also a major buyer of Australia’s most lucrative iron ore exports, although restrictions on the product will be a major blow to the steel industry which relies on large supplies from mining heavyweights such as the Rio Tinto Group and the BHP Group.