Coal news and updates

Australian miners have continued shipping small amounts of coal to China since the start of the year despite an unofficial ban on their coal imports, and those shipments have not been cleared by Chinese customs to enter the country.

 

Some analysts said miners were hoping that China would at least lift the ban for thermal coal ahead of the peak summer electricity-generation period, but there has been no indication that this may happen. Moreover, given the continued deterioration of communication channels between Beijing and Canberra, the prospects of any thawing in relations appear remote.

 

Amid worsening bilateral ties, China unofficially banned Australian coal in October, leaving dozens of vessels waiting off its coast. Over the ensuing months, some docked to release crew members, though cargoes were never cleared, and some were redirected to other markets.

 

But in February, shipping data showed that 180,000 tonnes of coking coal departed from the port of Hay Point in Queensland, one of Australia’s key coal terminals, bound for China. Australian customs recorded the shipment’s dispatch, according to Wood Mackenzie Vesseltracker, which provides maritime data.

 

Coking coal is used in steelmaking, whereas thermal coal is used to generate electricity.

 

Commodity and energy price agency Argus Media also tracked two 75,000-tonne shipments of mainly thermal coal leaving the Port of Newcastle in the state of New South Wales in February, bound for the Chinese ports of Xiamen and Bayuquan.

 

And in late January, data and analytics firm Kpler observed a 41,000-tonne shipment of coking coal on its way to the Port of Yangpu in Shanghai.

 

None of these shipments appeared to have been unloaded or cleared customs, analysts said, while the latest Chinese customs data shows there have been no Chinese imports of Australian coal – coking coal used in steelmaking or thermal coal for electricity generation – since December.

 

Argus Media analyst Jo Clarke said she also observed some boats docking in February, but for humanitarian reasons – to let crews disembark, rather than to unload coal.

 

Argus Media analyst Jingtai Lun added: “Some Chinese buyers were guessing that Chinese ports might clear some arrived cargoes to cope with stronger summer coal demand. But this is impossible now, as Beijing announced that it has suspended economic dialogue with Australia.”

 

Last week, the political conflict between the two countries ratcheted up a notch when Beijing indefinitely suspended its China-Australia Strategic Economic Dialogue with Canberra, citing ongoing “cold war” rhetoric from Australian politicians and the “current attitude of the Australian Commonwealth government toward China-Australia cooperation”.

 

The dialogue served as a forum for both governments to explore new investments between the two countries.

 

Some have viewed the move as more of a symbolic retaliation by Beijing against Canberra’s tearing up of Victoria state’s non-binding Belt and Road Initiative Memorandum of Agreement with China last month. But the Australian business sector has expressed concerns that it will erode the confidence of Australian companies doing business with China, and thus hurt future trade.

 

“Business and consumers in China take their cues from Beijing, and there is no disguising the parlous state of the political relationship with Australia. This will have an impact over time, as business and consumers look elsewhere,” the Australia China Business Council said in a statement.

 

The continued block on Australian coal imports could further push up the price of coal, which, like other commodities such as iron ore, has risen sharply amid a stimulus-led post-pandemic recovery in China and globally, analysts said. Iron ore prices hit a record high of US$230 a tonne this week.

 

But the price inflation in China – largely due to higher costs for imported commodities – should taper off in the second half of the year without any tightening measures needed from Chinese authorities, both Capital Economist and Morgan Stanley said in new analyses.

 

While the coal ban remains a sticking point in the relations between the two countries, it may prepare the two countries for a reduced coal trade as China increasingly focuses on becoming carbon neutral by 2060, according to associate professor Shi Xunpeng at the Australia-China Relations Institute.

 

Australia will have to ready itself for the new normal of a low-carbon future that is also being pursued by other countries in the region, including South Korea and Japan, Shi said.

 

A recent study by energy analyst Wood Mackenzie said coal producers are already feeling the pressure of scrutiny in regards to environmental responsibility, and alongside carbon taxes and now increasingly higher coal prices, the coal trade may dampen over time.

 

Wood Mackenzie research director Robin Griffin also noted that some carbon taxes imposed on seaborne coal have been short-lived, as was the case for Australia between July 2012 and July 2014.

 

“High-emitting mines will obviously be more susceptible to loss of margin at high carbon prices,” Griffin said.

 

The financing of coal production is also being scaled back, with Australian bank Macquarie announcing last week that it would stop financing coal projects by 2024.

 

Source: www.scmp.com