It is unlikely that Beijing will lift the coal ban on Australia – News Couple

It is unlikely that Beijing will lift the coal ban on Australia

A dredge recycling machine stands next to a pile of coal at the Port of Newcastle in Newcastle, New South Wales, Australia, on Monday, October 12, 2020.

David Gray | Bloomberg | Getty Images

China is facing its worst electricity crisis in years due to a coal shortage. While Australia has the coal Beijing needs, the world’s second-largest economy is unlikely to reverse the unofficial ban on Australian coal imports any time soon, analysts told CNBC.

This is despite recent media reports that China is releasing small amounts of Australian coal that has been stuck in Chinese ports for several months due to the embargo.

“Reports that small amounts of Australian coal have been allowed to clear customs in China have fueled speculation that the Chinese authorities will seek to ease the import ban on Australian coal,” Vivek Dhar, a mining and energy commodities analyst at the Commonwealth Bank of Australia, told CNBC. .

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

Late last year, China stopped buying Australian coal. It happened as trade tensions escalated between the two countries after Canberra backed a call for an international investigation into Beijing’s handling of the Covid-19 outbreak.

Before that, Australia was a major supplier of coal to China – in 2019, about 38% of China’s thermal coal imports came from Australia.

China’s energy crisis

But analysts say Beijing is not likely to lift import restrictions on Australia anytime soon.

Instead, they expect China will look to boost its own coal production, tap other international suppliers and push its industries to reduce production and emissions.

There are no signs that China will allow companies to buy new shipments of Australian coal, according to Rory Symington, principal analyst at Wood Mackenzie.

China is likely to push Indonesian suppliers for more coal, but they are almost at peak capacity.

“The political situation has not improved at all,” he told CNBC’s “Squawk Box Asia” in mid-October. “This is largely a political issue rather than an economic one, yes, there are no indications of any easing of the ban on new shipments.”

Beijing may also look to other countries for more coal.

“China is likely to push Indonesian suppliers for more coal, but they are almost at peak capacity,” Abinav Gupta, a dry shipping research analyst at Braemar shipbroker, told CNBC earlier this month.

“China is also trying to get more Mongolian and Russian coal to meet its demand; however, there is some competitive pressure for Russian coal from European buyers. We have also seen China buying more coal from suppliers in the Atlantic, such as the United States and Colombia.”

Commonwealth Bank’s Dhar said that despite the unofficial ban on Australia, China’s imports of thermal coal remained “fairly good” due to the increasing volume of supplies from Indonesia and Russia. He said that between January and August, Indonesia accounted for nearly 57% of China’s imports of thermal coal.

Impact on Australia

A freight train transporting coal from the Gunnedah coal handling and preparation plant, operated by Whitehaven Coal Ltd. , in Gunnedah, New South Wales, Australia, on Tuesday, October 13, 2020.

David Gray | Bloomberg | Getty Images

High coal prices are unlikely to fall immediately even if China lifts the import ban on Australian coal, according to Shane Oliver, head of investment strategy and chief economist at AMP Capital.

“I doubt that China lifting the import ban will have a significant impact on Australian producers as they will redirect them back to China but they will still get the same price,” he said in an email. “Ultimately, the high prices will not last, but they may continue [be] high for a while now.”

Oliver said Australian export earnings held up well despite the coal ban and a sharp drop in iron ore prices.

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