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China’s cut to coal imports

In October, China’s coal imports dropped by 47% compared to the same period last year. This equates to almost 12 million tonnes in one month and was a result of escalating trade tensions between Australia and China. 

China has reportedly banned Australian coal, which may have a detrimental impact on the industry. In the 2019 financial year, Australia’s coal exports were valued at $69.6 billion, and China imported $14 billion from Australia. Last year, Australia supplied China with over 40% of their coking coal imports and 57% of their thermal coal. 

The Government has been in talks with the Chinese authorities and industry, but there hasn’t been any official ban on Australian coal imports as yet. However, it has been reported that authorities have held over $700 million worth of Australian coal at Chinese imports due to environmental issues claiming concerns over the safety and quality of the products. It has also been reported that power stations and steel mills in China have been told to stop using Australian coal. BHP has also confirmed that Chinese customers have started deferring shipments of coal

While this is concerning to industry, it also opens up the opportunity to expand coal exports to other markets. The Minerals Council of Australia expects Asia to continue to drive export growth for coal. For example, population growth in urbanisation and infrastructure spending is expected to increase demand in India. Due to its cost-effectiveness, India is expected to fuel up to 60% of this growth with coal until at least 2030. 

Companies such as Coronado Global Resources are also proving that a Chinese import ban will not impact them significantly. The company which has no long-term contracts with Chinese markets and delivered an increase in coal output in the September quarter. The company achieved record quarterly production at its Curragh mine in Queensland along with record sales volumes of 3.6 million tonnes. 

Other companies have also continued to forge relationships in China. Fortescue Metals Group is a case in point, having recently secured 12 new agreements with Chinese steel mills, procurement partners and financial institutions valued at over $5 billion. 

While it is unclear how long the strained trade relations between Australia and China will go on for, there are still opportunities for coal in other markets and even in China in other industries. The relationship is one that industry will need to monitor closely to determine if changes in strategy will be required to weather this storm. 
 

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