Chinese ban on Australian thermal, coking coal imports likely to remain indefinitely

Daniel Fowler
October 14, 2020

Appearing on Sky News this morning, Senator Simon Birmingham said Australia does not have proof of the verbal orders, which may be routine management of importation quotas.

Australian politicians have played down the issue, with Prime Minister Scott Morrison on Tuesday characterising China's move to put quotas around imports as "not uncommon".

"We don't have proof that this is occurring, but as I said, we are taking the accusations at a value where we are at least engaging with the Chinese system".

China's central bank also announced over the weekend the removal of reserve requirements for some foreign exchange forwards, cementing speculation Beijing wants to curb the yuan's strength.

CEO of the Minerals Council of Australia Tania Constable told in a statement there are a range of reasons why Chinese importers may or may not stop accepting Australian coal.

Mr Morrison is confident the Chinese arrangements are not unusual.

'Some reports have suggested that as much as 7 million tonnes of coal are on board vessels waiting along Chinese coast, up from the usual 4 to 5 million tonnes normally seen during this period of time along the coast'.

The minister has not been able to contact his Chinese counterpart for many months, with diplomatic relations in the deep freeze.

"But we take the reports seriously enough to try and seek some assurances from Chinese authorities".

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China's coal imports had been expected to slow in the second half after heavy imports earlier this year.

Commodities analysts believe that the informal approach was politically motivated though it also aligned with tightening coal import quotas and Beijing's goal to reduce consumption and carbon emissions.

The Australian dollar fell about 0.5% on Tuesday after reports that China has halted coal imports from the country as their relations deteriorate while the USA dollar recovered from a three-week low plumbed the day before.

The Australian economy is highly dependent on exports of natural resources like coal, iron ore, gold and increasingly liquid natural gas.

Westpac says China accounts for around 25% of global seaborne metallurgical coal (met coal) demand, with Australia making up 58% of seaborne supply.

Australia supplied over 40% of China's total coking coal imports in 2019, and about 57% of its thermal coal.

A ban on Australian coal would mark the most serious escalation in tensions between Canberra and Beijing in a tiff that has already impacted agricultural exports, with swinging tariff hikes being placed on Australian barley and wine.

'And we'll continue to work through these and in the future there will be other issues and we'll continue to work through those issues as well.

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