For a fresh look at the stories important to Australian business and politics, sign up for our weekly newsletter.
After loading coal, the DZ Weihai slid into turquoise waters off the coast of Australia this month and embarked on a 14-day voyage to the South China port of Yangpu. How long the ship waits to unload its cargo upon arrival is a mystery.
Despite a Chinese ban on coal imports from Australia, leaving about 70 ships, 1,400 seafarers and 6.4 million tons of fuel in offshore limbo, some ships continue to make the voyage. While the cargo and crew are stranded Caught between authorities not letting them unload and buyers not letting them leave, perhaps most curious of all is what drives extra shipments.
The ships DZ Weihai and Jin Lang are on their way to China.
While mundane things such as contractual obligations come into play, traders are likely to be motivated by a combination of hope and money. China is considering accepting shipments that arrived before the ban, which could lessen the optimistic restrictions. If they do, a windfall awaits as the gap between Chinese and Australian coal prices has widened to a record level.
“Chinese buyers with stranded cargoes are reluctant to resell them because the cost of these cargoes is so much lower than domestic prices,” said Rory Simington, chief analyst at Wood Mackenzie Ltd. costs including demurrage would still be well below current domestic prices. “
A single shipment of 100,000 tons of coking coal from Australia would cost a trader about $ 14 million based on sea prices, excluding transportation costs. The same amount bought domestically would be about $ 28 million. The cost of not unloading a bulk carrier, known as demurrage, is between $ 13,000 and $ 17,000 daily.
The Australian ban has never been publicly recognized by Beijing, making it difficult to determine the start date. Chinese power plants and steel mills were verbally told in mid-October to stop the fuel. Authorities also ordered merchants to stop purchasing a raft of the country’s raw materials, including coal, starting November 6.
China’s customs administration did not immediately respond to a fax requesting comment.
As of Oct. 15, 20 ships have loaded coal in Australia and declared destinations in China, including the DZ Weihai this month, according to shipping data collected by Bloomberg. Some of them, like the Rixta Oldendorff, left for other countries halfway through the journey. But at least eleven have joined the larger fleet and are waiting to unload outside Chinese ports.
Certainly, China’s ban on Australian coal has dramatically shifted global flows of the commodity: mainland buyers ordered several South African coal shipments in December and increased imports from Indonesia and Russia. The value of China’s purchases of Australian coal last year fell 16% to $ 7.9 billion.
Hanging on the left
About 6.4 million tons of Australian coal have been stranded off the Chinese coast
Source: Kpler
Yet China is is considering accepting some Australian coal loads that arrived before the import ban took effect, a person familiar with the situation said this month. The deliberations are in the early stages and any decision requires the approval of senior leaders. The wider ban on Australian coal remains in effect, and ideally the cargoes would be resold to buyers in other countries, the person said.
“It is interesting to note that new coal deals have recently been signed, despite there being no clear signal that the Chinese ban on imports from Australia will be lifted any time soon,” said Monica Zhu, a dry bulk analyst at Kpler. “These are individual trader activities and may not represent the mainstream market.”
– With help from Dan Murtaugh, Matt Turner, Winnie Zhu and Serene Cheong