Business & Investment

Beijing is unlikely to lift Australia’s coal ban

On Monday, October 12, 2020, a bucket wheel reclaimer stands next to a coal pile at Newcastle Harbor in Newcastle, New South Wales, Australia.

David Gray | Bloomberg | Getty Images

China is facing the worst electricity crisis in a few years due to a shortage of coal. Analysts told CNBC that Australia has coal needed by Beijing, but it is unlikely that the world’s second-largest economy will soon revoke the informal ban on Australian coal imports. ..

It’s despite recent media coverage It suggests that China is releasing a small amount of Australian coal that has been stuck in Chinese ports for months due to a ban.

“A small amount of Australian coal has been allowed to pass through Chinese customs, the Chinese authorities have told CNBC that Australian coal There is growing speculation that it is trying to ease its import ban. ” ..

“I don’t think Chinese authorities will ease China’s coal ban on Australia this winter,” he said.

At the end of last year, China stopped buying Australian coal.It happened as Trade friction between the two countries surged After Canberra endorsed a call for an international investigation into the handling of the Covid-19 outbreak in Beijing.

Prior to that, Australia was a major coal supplier to China. In 2019, about 38% of China’s steam coal imports came from Australia.

China’s energy crisis

China is dependent Focus on coal for power generation..

After mid-August Reported by at least 20 states across the country Power outages of varying degrees. This was due to several factors, including a shortage of coal supply, a strict government obligation to reduce emissions as the global economy recovered from the pandemic slump, and increased manufacturing demand.

Authorities reportedly called on top state-owned energy companies to secure supply for the coming winter at all costs.

However, analysts say Beijing is unlikely to lift Australia’s import restrictions soon.

Instead, they predict that China will increase its coal production, utilize other international suppliers, and encourage its industry to curb production and emissions.

According to Wood Mackenzie’s chief analyst, Rory Simington, there are no signs that China will allow companies to ship new Australian coal.

China is likely to force Indonesian suppliers to increase coal production, but they are near peak capacity.

“The political situation hasn’t improved at all,” he said on CNBC.Squawbox Asia“This is primarily a political issue, not an economic one. Of course, there are no signs that the ban on new cargo will be relaxed.”

Beijing may also seek more coal from other countries.

“China is likely to force Indonesian suppliers to increase coal production, but it has almost peaked,” Abinaf Gupta, a dry cargo research analyst at shipbuilding company Bremer, told CNBC earlier this month.

“China is also trying to get more Mongolian and Russian coal to meet demand, but there is competitive pressure on Russian coal from European buyers, and China is more than from Atlantic suppliers. I saw buying a lot of coal. The United States and Colombia. “

Dhar of the Commonwealth Bank said China’s steam coal imports are growing “quite well” due to rising supply from Indonesia and Russia, despite an informal ban on Australia. Between January and August, Indonesia accounted for about 57% of China’s steam coal imports, he said.

Impact on Australia

Australian steam coal at Newcastle Port, the benchmark for the Asian market, Rapid increase this year despite China’s import banAccording to commodity price provider Argus.

“The main driver of current steaming coal prices, especially from Australia, is demand in North Asia ahead of this winter,” said Dahl. He added that Australian coal prices are likely to depend on how cold the coming winter will be.

The freight train will be Whitehaven Coal Ltd in Gunnedah, New South Wales, Australia, on Tuesday, October 13, 2020. Coal is shipped from Gunnedah Coal Handling and Prepararation Plant operated by.

David Gray | Bloomberg | Getty Images

Even if China lifts Australia’s coal import ban, it is unlikely that the rise in coal prices will soon fall, according to Shane Oliver, AMP Capital’s Head of Investment Strategy and Chief Economist.

“I don’t think it will have a big impact if China lifts the import ban, because Australian producers will get the same price just by redirecting to China,” he said in an email. “Ultimately, empty highs won’t last, but it’s still possible [be] It’s still expensive for a while “

Australian Export revenue is growing steadily Despite the coal ban and the sharp drop in iron ore prices, Oliver said.

Dahl of the Commonwealth Bank said that if Beijing resumed buying coal from Canberra, it would increase Australian coal demand and further support prices.

Still, Australian officials have accused China of trade sanctions. Expanded to other export items — Wine, barley, etc.

In a statement to the World Trade Organization last week, Australia said: “China states that these actions reflect legitimate trade concerns, but there is increasing information that China’s actions are motivated by political considerations.”

Beijing is unlikely to lift Australia’s coal ban Beijing is unlikely to lift Australia’s coal ban

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