China’s Australian coal blacklist now official
Australian coking coal is a key ingredient for China’s huge steelmaking industry. Picture: Bloomberg
Beijing has formalised its blacklisting of Australia’s $14bn annual coal exports to China at a high level meeting held over the weekend, deepening a crisis for one of the nation’s biggest export earners.
The National Development Reform and Commission met with major Chinese power companies on Saturday to address a surge in coal prices in the world’s second biggest economy, according to state media reports.
The Commission – China’s top economic planning agency – has not yet commented on the meeting, but reports by state-controlled media singled out the Australian coal industry.
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“China’s top economic planner on Saturday gave approval to power plants to import coal without clearance restrictions, except for Australia,” reported the Global Times.
The state-controlled paper suggested coal producers in Mongolia, Indonesia and Russia would benefit from the change in policy, which attempts to calm soaring coal prices in China.
Blacklisting Australian coal into 2021 would be the most costly strike in China’s wide ranging program of trade retaliation put in place after the Morrison government called for an independent inquiry into the origins of the coronavirus in April.
There were market expectations the quota would be reset by January but the latest information suggests Australia faces an extended ban that could last through much of next year.
The stoush has shown no sign of subsiding, with the amount of coal delivered to Chinese customers from Australia plummeting by 78 per cent in November to 1.4m tonnes.
Citi analysts think China’s ban on Australian metallurgical coal may be lifted by mid-2021 with its steel mills forced to resume buying due to their reliance on high-quality Australian grades.
But the move would take the total amount of annual exports blocked by port authorities, crippled by tariffs or banned by customs to more than $20b, following strikes against wine, wood, barley, beef, lamb and lobster.
The Australian has previously revealed that more than 80 ships carrying Australian coal worth over $1.1bn were stuck off the Chinese coast unable to offload their blacklisted cargo.
Much of that banned product is coking coal, a key ingredient in steel making.
As well as hurting Australian coal producers, the coal ban has led to a price surge on the input costs of China’s steel making industry.
“It can’t go on forever because they are really crippling themselves,” former trade minister Mark Vaile told The Australian in November.
Metallurgical coal miners in Canada – like Australia, an American ally with strained relations with China - have benefited from the politically motivated trade restrictions.
Canada’s Teck Resources, which produces about 26 million tonnes of high-grade coking coal from its mines in British Columbia, said late last month it was diverting spot cargoes to China to take advantage of short-term pricing.
China’s steel making industry is also being hit by a rise in the iron ore price, as its second biggest supplier Brazil’s Vale last week said it was struggling to increase production levels.
Australia supplies more than 60 per cent of China’s iron ore.
Exports of the $85bn commodity have been untouched in Beijing’s eight month long trade retaliation campaign.
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