Australia ‘deeply troubled’ by reports of Chinese restrictions on its coal

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Australian Trade Minister Simon Birmingham said on Tuesday that he was “deeply concerned” by new reports in Chinese state media that the country’s chief economic planner has effectively banned certain coal imports from Australia. The Global Times, a state-run tabloid, reported last weekend that the country’s National Development and Reform Commission has authorized power plants to purchase coal overseas without restrictions – except from Australia.

If true, the reports would “indicate that the Chinese authorities are using discriminatory trade practices,” Birmingham told Radio National in Australia. China has already banned or reduced tariffs on a range of other Australian exports.

Asked by reporters on Tuesday about the reports, China’s Foreign Ministry addressed questions to the “ relevant authorities. ” But spokesman Wang Wenbin did acknowledge that “the Chinese authorities have recently taken relevant action against some Australian products being exported to China in accordance with the law and regulations.”

Meanwhile, Australian Prime Minister Scott Morrison told reporters in Australia on Tuesday that the government is “seeking clarification” on the reports, adding that the country has not heard from the Chinese government yet. He called reports that China is blocking Australian coal a “bad outcome for the trade relationship” between the two nations.
Australia is out of recession. Now it must avoid a trade war with China

Relations have deteriorated since April, when Morrison called for an international investigation into the origins of the coronavirus pandemic. Beijing called that movement ‘political manipulation’ at the time.

In the months since, China has imposed high tariffs on Australian winemakers and banned or taxed exports of other products, including beef and barley.

Morrison said on Tuesday that Australia sends Australia $ 4 billion ($ 3 billion) worth of thermal coal to China every year, adding that Japan is a bigger market than China for those exports. Thermal coal is mainly used to generate electricity. In total, Australia exported approximately 14 billion Australian dollars ($ 10.5 billion) worth of coal to China in fiscal year 2018-2019.
But the impact on trade of any action against Australian coal is difficult to estimate. Australian media pointed out weeks ago that hundreds of millions of dollars worth of coal had already been held off the coast of China, an indication that Beijing was at least informally putting pressure on Australia’s vital mining industry.

“This lack of transparency makes it difficult to say how much escalation this news is,” said Sean Langcake, senior economist at Oxford Economics, noting the existing disruptions in the thermal coal trade. “These have clearly not been resolved, and it is difficult not to see this news as a further deterioration.”

Investors in Australia’s top coal producers consider the reports a bad sign. Shares in Coronado Global and Yancoal Australia each fell more than 8% in Sydney on Tuesday. Whitehaven Coal is down nearly 6% on Tuesday and is down 10% so far this week.

Analysts from ANZ Research wrote in a research note that the Chinese reports confirm “what has been assumed since reports of import restrictions on coal from Australia appeared in October”. They noted that while China is a major market for Australian thermal coal – it accounted for nearly a third of Australia’s total exports in 2018 – that market share has since been declining.

“Australian exporters have found additional buyers in South Korea, Vietnam and Japan,” the analysts wrote. “As such, we see Australia’s thermal coal exports holding up relatively well, despite the Chinese ban.”

Economists have noted that other mining materials, mainly iron ore and coking coal used in steel production, make up a particularly large portion of Australian exports. Langcake told CNN Business earlier this month that restrictions on such exports are unlikely given the dependence on China’s steel industry. (Iron ore prices are trading at their highest levels in years, in part because of rising demand as China recovers from the pandemic.)

– Angus Watson contributed to this report.

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