China Removes Remaining Barriers from Unofficial Trade War on Australian Coal

China, desperate to kick start their economy and improve civil harmony has quietly removed trade restrictions imposed in late 2020 on Australian coal imports. Earlier this year Chinese authorities gave four major importers permission to resume purchases of Australian coal, which began shipping in January. Bloomberg reports that China’s ports and customs offices have been told to allow all domestic companies to import Australian coal, according to people familiar with the decision, who asked not to be identified because the information isn’t public.

Australia’s BHP is the world’s biggest coking coal exporter. China is the world’s biggest steel producer and consumer and its imports of the fuel exceeded 290 million tonnes last year.

Coking Coal

Chinese Communist Party state-owned news the Global Times had earlier indicated “the full resumption of Australian coal” trade could start from as early as next month. Coal prices rose unabated with supply chain disruptions, they have since pulled back but remain and at elevated levels. Australia replaced the Chinese imports with strong demand from Europe, Korea and Japan. With the global economy cooling since coal prices have collapsed in half since fetching just shy of $US400 a tonne last December Newcastle thermal coal price edged lower to $US182.90 a tonne. Whitehaven Coal shares plunged 5.3 per cent to $6.75, and New Hope lost 5.1 per cent to $5.24 prior to the news.

Australian coal is considered premium quality and is favored by China’s steelmakers and power plants. Imports could reach 1 million tonnes in the first half of March alone, according to China’s top coal lobbying group.

Australia prior to the ban was the second largest coal supplier to China, accounting for nearly 30 per cent of China’s coal imports or more than 70 million tonnes of supply. Chinese buyers favour high-quality thermal coal and coking coal.

China has never officially acknowledged a ban was in place for political reasons, as it would be a violation of World Trading Organization (WTO) rules. China had a record cold winter, a showdown with Australia who are the biggest coal exporter in the world and the CCP trying to implement emission standards.

The Australian coal industry became increasingly optimistic that China may relax its ban on Australian coal late last year, when some Australian coal cargoes were allowed to pass through Chinese customs in October.

In January China’s state planner, The National Development and Reform Commission (NDRC) summoned China Datang Corp, China Huaneng Group, China Energy Investment Corporation and China Baowu Steel Group to discuss the resumption of coal imports from Australia. The firms will be granted permission to purchase Australian coal only for their own use.

Data from commodities platform Oceanbolt shows that in the year to date over 3.2m tons of coal has already been exported from Australia to China, the majority on capesizes.

“The resumption of coal trades from Australia to China will most likely alter trade patterns fundamentally in favour of longer freight distances, favoring particularly the capesize asset class,” Lorentzen & Co stated in a recent report.

Source: SP Global, Bloomberg

From The TradersCommunity Research Desk