Beijing 'rebuffed' pleas from Chinese steelmakers to lift ban on Australian coalBy Nick ToscanoJanuary 15, 2021 — 5.00amSaveShareNormal text sizeLarger text sizeVery large text sizeThe Chinese government has rejected pleas from its own steel industry to lift bans on Australian coal cargoes, keeping dozens of ships holding 8 million tonnes of the commodity stranded offshore.More than 70 vessels carrying Australian coal have been unable to unload in China since mid-October, coinciding with a souring of diplomatic and trade tensions between Canberra and Beijing.Australian miners had hoped the restrictions may have eased from January 1 when China reset its unofficial import quotas, but analysts and industry leaders on Thursday warned China appears to be taking an even "firmer position" against Australian coal.Ships have continued to unload coal from other countries at Chinese ports even as those from Australia languish.CREDIT:APCoal mining insiders, not authorised to speak publicly on the matter, said some of their customers in China's steel sector had notified them that they had lobbied Beijing to lift the Australian import ban late last year with the help of their industry associations, but their efforts were unsuccessful."The Chinese steel industry was lobbying their government saying they needed Australian product because of the quality of it and the volume they need for making coke to make steel," a source said. "That didn't see any major change."China last year imported $4 billion of Australian thermal coal for use in power stations and nearly $10 billion of metallurgical coal, which is used in blast furnaces to make steel. Australian coal exporters have close and long running ties with their Chinese customers, with some relationships stretching back as far as 60 years."There's some challenges in the relationships. We have made representations in relation to those coal exports," Treasurer Josh Frydenberg said in a press conference.Robin Griffin, Wood Mackenzie's head of metallurgical coal, said the global consultancy was also aware of numerous requests to China's Development and Reform Commission by individual steel mills and their industry groups as far back as October for the import curbs to be eased."It's pushing up the cost of supply of coal, it's increasing the cost to coke, but it's also affecting the quality of material they are producing because there's not that much low-sulphur premium coal around, so they're having to use higher sulphur-content coal which has an impact on blast furnace productivity and strength of steel you produce."They are not happy about what's going on ... but they've basically been told they have to deal with it."Wood Mackenzie said the fact that the Chinese government was willing to wear the economic pain in the steel industry – which is paying a premium to secure alternative coal as well as facing rocketing iron ore prices that have doubled in 12 months to beyond $US160 a tonne – suggested a lack of urgency in Beijing to normalise its trade relationship with Australia .Mr Griffin said there was a risk the coal restrictions could now extend for all of 2021.RELATED ARTICLEChina relationsMining sector pleads for Canberra to restore China trade 'stability'"It doesn't look likely to end quickly," he said. "In China, they are preparing for something that lasts all year."The head of Whitehaven, Australia's largest independent coal producer, on Thursday said there did not seem to be any easing of Australian coal bans in China since the start of January."I haven't heard any news about a change in quota, quite the contrary: there seems to be a rhetoric around a firmer position about China not taking Aussie coal," Whitehaven chief Paul Flynn said."Let's see how this plays out as the year unfolds."Of the 7.8 million tonnes of coal stuck off the Chinese coast, 2.6 million tonnes are thermal coal and 5.2 million tonnes are metallurgical.Whitehaven does not export coal directly into China, but Mr Flynn said the wider metallurgical coal market remained "subdued" due to the China situation.For thermal coal, however, Mr Flynn said the Chinese bans were reshaping the market and causing trade flows to realign."Physical adjustments have been made in the thermal market for sure," he said. "We are seeing a lot of players who would otherwise sell coal into China selling into areas where they haven't in the past, and China is buying coal from non-traditional sources."Buyers in China have been forced to pay more expensive prices for thermal coal from other sources including Indonesia, Russia and South Africa in order to secure coal with a similar energy value to Australian product. This has allowed Australian producers to send more coal into less-traditional destinations such as India, Bangladesh and Turkey as well as other south-eastern and north Asian markets.UBS analyst Glyn Lawcock said coal shipments for the December quarter from Queensland were 10 per cent lower year-on-year. He said it raised questions about the potential impact on Australia's largest miner, BHP."Could BHP coal guidance be revised lower?" he asked."Given the recent trade tensions between China and Australia and the restrictions imposed on Australian coal exports, we expect BHP's met coal production to continue to be soft."Australian coal shipments, the nation's third-largest export, are set to fall 30 per cent per cent this year from $54 billion to $37 billion, mainly due to COVID-19 and the China bans. However, coal is also under pressure for its contribution to climate change as three top coal buyers– Japan, China and South Korea – ramp up efforts to neutralise their emissions by 2050-60, requiring less consumption of fossil fuels.A spokesman for the Department of Foreign Affairs and Trade said the Australian government had made multiple representations to the Chinese government about the delays in clearing Australian coal and the welfare of the crew on board the vessels."We urge all parties to reach a resolution as soon as possible," he said. "A quick resolution will allow vessels to unload in a timely manner to satisfy Chinese buyers and consumer needs and ensure the wellbeing of the crew aboard these vessels."Australia's Industry Department last month raised concerned about the metallurgical coal outlook in the event that the China bans extended into 2021."In such a scenario, prices would stay low for longer, as Australian exporters take time to adjust," it said.SaveShareLicense this articleMiningChinaCoalNick ToscanoTwitterEmailBusiness reporter for The Age and Sydney Morning Herald.
I understand and support CCP efforts to decarbonise their manufacturing and see a ban on thermal coal as being understandable.
However the ban on the best fuel in the world for steel making, our ultra efficient low sulphur metallurgical coal has got to be the dumbest expression of foreign policy I have ever witnessed.
Not only does it punish Aust coal producers. It punishes Sino Steel makers significantly pushing up the cost of steel making, which in turn produce an inferior product. Sino steel makers are being forced to used lower caloric higher sulphur metallurgical coal that is vastly more toxic which in turn poisons the local environment.
Aust coal companies commonly own & produce coal in other countries, those that have been able to do that and then sell direct into China are laughing loudest...
I really hope that the CCP can actually accept the truth of these bans. They actually weaken the Chinese economy and do much more harm to the environment.
That said.
Not sure who is dumber, the CCP for putting the ban on Metallurgical coal or the Aust gov for pushing the CCP about the origin of CV19.
Seriously mate. The dumb dumbs in parliament wouldn't know what's good for them if it smacked them in the face...
If the steel makers margins are higher I would suggest that IO prices could grow further, faster. This is our collective interest, and the improved air quality by using high quality, high calorific low Sulphur metallurgical coal to manufacture steel to help build the world...WIN/WIN.
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