Technically you can’t say the ban is over because it was never formally in place but in reality there is a change of attitude by the Chinese authorities which is seeing a return of Australian coal to the Chinese market.
At this stage, however, questions remain as to what level export volumes from Australia will build up to and allied to this what the general impact on seaborne coal trade will be?
The unofficial ban came into being from late 2020 arising from arguments about the origin of Covid-19. Australia was seen to be pointing a finger at China in this respect and following this orders from China for coal dried up. China elected instead to secure supplies from Mongolia, Russia, the USA, Canada, Colombia and Indonesia. This had an impact on coal pricing in 2021 and proved in certain instances to be a logistical challenge but nevertheless sourcing from these countries did mean that China was able to fill a 80 million ton deficit.
China’s coal imports were around the 300 million mark in 2019 and 2020, rising to 320 million tons in 2021.
The door to revived Australian coal trade was seen to inch open on January 3 when China’s National Development and Reform Commission decided to allow four state-owned companies – China Baowu Steel Group, China Datang, China Huaneng Group and China Energi Investment Corp – to import Australian coal for their own use. It is the case that further orders have been placed since.
There is nevertheless caution on the supply side as to the re-opening of this trade door. While the nod has been given to buyers that they can proceed with coal purchases from Australia there are still some reservations about the potential attitude of Customs when receiving cargoes. There is also the reality that in developing alternative markets to achieve coal sales to fill the gap left by China Australian suppliers have built strong relationships elsewhere. It is unlikely that they will be in a rush to close or scale these down based on their hard-earnt understanding of political influence over Chinese coal imports. Also influential, Bejing has built its energy supply by producing more electricity from thermal power generation, wind and solar farms, resulting in a significant alleviation of its energy shortage.
The Russian invasion of Ukraine also comes into play – one of the impacts of this on pricing is that it has to a significant extent served to close the price gap between Australian coal and Chinese domestic supplies. So, as it stands, only marginal economic benefits will be realised on both sides. It is not yet by any means a return to the way things were and longer term this may play to the benefit of both parties.
