Thu. Jan 20th, 2022

Australia exported 213 million tonnes of thermal coal in 2020 and 192 million tonnes in 2021, while China imported around 300 million tonnes of coal in both 2019 and 2020, which is around 25 million tonnes per month. MySteel estimated in August that 5.9 million tonnes of coke had been stranded in Chinese ports.

Australian coal was unofficially banned in China at the end of last year as part of a broader economic coercion campaign that limited exports of about $ 20 billion, including wine, beef, barley and seafood.

China’s desperate need for more coal while struggling with energy shortages and an apparent softening of Xi Jinping’s “Wolf Warrior” style of diplomacy has created hope in business circles that some politically motivated restrictions will be phased out.

Australian and Chinese top executives will hold a high-level dialogue on climate change next month, which is seen as a positive sign. However, Defense Secretary Peter Dutton’s warning on Friday about the potential for military attacks from China means that bilateral relations are expected to remain tense in the medium term.

Analysts and industry sources said that while the door was clearly slammed for some stranded cargo, it was hard to say whether it was the precursor to a broader change in policy.

Industry data also suggest that a potential reason for the cargo being cleared is that the congestion of coal ships in Chinese ports has been eased, which may be a symptom of weak demand.

BHP CEO Mike Henry told shareholders in October that he expected the ban to continue for years. Other coal mine leaders agreed.

“When I was in the US, I heard about rumors that China might open the doors to Australian coal on a quota basis, but the market has not seen that yet. I assume China will stay away from Australian coal through 2022,” Coronado said Global Resources CFO Gerhard Ziems.

Coal from Mongolia

However, industry sources confirmed that there were signs that stranded cargoes were now being imported into China.

China’s total imports of coking coal, used for steelmaking, rose slightly to 4.38 million tonnes in October from 4.35 million tonnes in October, the latest data show.

This was mainly driven by coal from Mongolia, which rose 81.6 per cent month-on-month to 1.2 million tonnes, although Australian shipments also contributed to the increase.

“It is in line with market rumors that the customs authorities will clear and release some Australian coal from ports,” said Jia Na, a coal analyst at Shanxi-based Today Think Tank, in an article posted online.

“Some import traders have not yet cleared customs due to the expiry of import licenses and other customs declaration procedures, but they are already making up for it and the Australian coal stranded in the ports has gradually flowed into the market.”

Record output

Analysts said demand for seaborne coking coal imports from the United States and Canada had weakened as a result. U.S. coke coal imports fell 43.05 percent in October from the month before to 836,000 tons.

The latest import data came when China’s nationwide coal production hit a record high of 12.05 million tonnes in November, when it increased domestic production.

The rise in coking coal comes ahead of an expected rise in Chinese steel production in the coming months, after the government imposed restrictions on production ahead of the Glasgow climate summit and the Beijing Winter Olympics. The stocks of thermal coal used to generate electricity are also running out as the country faces crippling power shortages.

China’s domestic coal production is also at record highs after miners were told to increase production to cool rising commodity prices.

Another analyst said the coal shipments, which were cleared in October, were not new imports and could have already been cleared through customs before the ban was introduced and had been stranded.

It told sources in the coal industry Australian Financial Review last month that some shipments of the item were allowed to clear customs.

China is struggling to deal with a national power shortage that threatens the country’s economic recovery.

Leaders and diplomats in the coal industry say they are hopeful that the move is the first phase of a broader easing of restrictions introduced almost a year ago. While China would be reluctant to be seen backing up its efforts to punish Australia economically, its current power crisis means it has no choice.

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