Australia concerns coal coal as China’s next target



Sydney- Australia has a question for China: Have you banned any of our top exports?

Trade Minister Simon Birmingham said the government was “working through general diplomatic channels” to clarify reports in two trade publications that Chinese authorities had called off Australian coal imports to several state-owned steelmakers and power plants Have asked for

Ken McKenzie, president of BHP Limited

Said on Wednesday that some Chinese customers are asking for the removal of their coal cargo. The world’s largest mine company, by market cap, is working with them on whether there are restrictions on Australian coal imports.

In a press conference after the company’s annual meeting, he said, “If the rumors are true, it will be true.”

In recent months, tensions between the two countries have reached new heights. Australia began seeking support from European leaders to investigate China’s response to coronovirus – which had previously spread widely in the Chinese city of Wuhan – as China banned the import of Australian beef, barley and wine. It warned its people against traveling to Australia, whether as tourists or students, increasing racial discrimination against the Chinese people.

China is Australia’s largest two-way trade partner and top export destination, and ranks second after coal iron ore in Australia’s exports by value. China buys 25% of Australia’s coal exports. An explicit ban on Australian coal could violate World Trade Organization obligations as well as the free-trade agreement between the two countries.

Traders say Chinese coal buyers are behaving as if the restrictions are real: Australian thermal coal demand in China has plummeted this week, and the Newcastle benchmark price has fallen sharply.

“We have heard both that the government has not given orders to the buyers and also said that a fresh quota will be issued soon. Nobody knows, ”said a European coal trader. China sets a quota on coal imports, which aims to support domestic miners.

“There have been instances of Australian cargoes being inhabited elsewhere by Chinese merchants, and prices have been caught,” the trader said. “But then, nobody knows how strict or permanent the instructions really are.”

The Australian government is seeking clarification “points to the horrors of the incident,” said Tyler Baroda, a London-based mining analyst with RBC Capital Markets.

“Coal is now following beef, barley and wine as a target for Beijing,” said Michael Schuibridge, a former Australian defense-intelligence officer who is now a director at the Australian Strategic Policy Institute. “Even though China’s coal production is lower quality and more expensive than Australian coal, the Chinese government may be willing to impose these costs on Chinese steel and power producers for two reasons: curbing domestic coal demand and more Put economic pressure on Australia. ”

Reports raising concern include one from S&P Global Plates, covering the energy and commodities markets. It cited several unnamed sources saying that Chinese state-owned utilities and steel mills were told to immediately stop imports of Australian thermal and coking coal. Others, Argus Media said, were applied to at least some state-owned steel manufacturers and power plants in the order, but others were not reported. S&P Platts, one of the companies mentioned by Huaneng Power International,

Told the Journal that it had not received notice.

Australia’s coal industry rejected reports saying that trade with China varies through the year based on several factors, including quotas.

“Australia will continue to see demand for its high quality coal and the medium-term trend will remain positive,” said Tania Constable, chief executive of the Minerals Council of Australia.

Trade Minister Mr. Birmingham told reporters on Tuesday, “We have known for recent years that the way China has managed coal imports has some cyclical patterns, and that could be another matter.”

China’s foreign ministry did not respond to a request for comment. In press talks, Chinese Customs and Foreign Affairs officials did not directly answer the question whether any factories were asked to stop buying Australian coal.

Customs spokesman Lee Cuiwen said on Tuesday that in the first three quarters of the year, the total value of China’s imports from Australia was down 5.1% from a year earlier to about $ 89 billion.

While China’s economy has recovered strongly from coronovirus lows in the first quarter, analysts say coal imports have been weak due to the quota.

Analysts at Jefferies said in a note, “Even though there is not a complete ban on Australian coal imports, we are concerned for China’s coal imports to decline in 2021 and lower sea prices.”

Write Rachel Pannett at [email protected]

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