Energy shortage forces China to turn to Australian coal but don't expect ‘meaningful' lift in ban

Asia's Tech News Daily

China has buckled under the weight of coal and energy shortages to resume directly buying the commodity from Australia for the first time in almost a year.

Commonwealth Bank Global Markets Research analyst Vivek Dhar on Tuesday revealed China imported 2.8 million tonnes of coal last month.

Mr Dhar said it was the first “official” purchase since November 2020 after the Asian superpower imposed the unofficial ban a month earlier amid growing diplomatic tensions between the two nations.

However, Australian coal producer Whitehaven reported earlier this year that locally produced coal was still indirectly making its way to China through other markets.

Mr Dhar said the direct purchase “looks to be a pragmatic move by Chinese policymakers”.

“Australian coal that was sitting at port stockpiles were cleared by Chinese customs last month to address an acute shortage in China’s coal and power sector,” he said.

Energy shortage forces China to turn to Australian coal but don’t expect ‘meaningful’ lift in ban

Camera IconChina has resumed buying Australian coal but an expert says it will probably not ‘meaningfully’ relax the unofficial ban in the foreseeable future. Credit: News Corp Australia

About 72 per cent of the Australian coal that was cleared was thermal coal, which accounts for about 63 per cent of China’s power generation mix, and its energy shortage reflected a rapid recovery in its industrial economy as a result of infrastructure‑heavy stimulus, Mr Dhar said.

While a cold winter would keep policymakers keenly watching to ensure there’s enough coal supply to meet demand in coming months, they had also boosted local coal output and implemented power rationing for industrial users, he said.

“Given the success that China has achieved in containing the power crisis to date, it’s difficult to see the rationale that policymakers take the extra step of relaxing the unofficial ban with Australia to boost coal imports,” Mr Dhar said.

“We think it’s unlikely that China will meaningfully relax the unofficial ban on Australian coal in the foreseeable future.

“It’s probable that China continues to clear Australian coal held at Chinese ports, especially if this winter proves to be colder than normal.”

Energy shortage forces China to turn to Australian coal but don’t expect ‘meaningful’ lift in ban

Camera IconWine producers have also been turning to other markets, with Penfolds owner Treasury Wine Estates increasingly focusing on the premium US market. Emma Brasier Credit: News Corp Australia

He said other markets would continue to be the key drivers of demand for Australian coal for the foreseeable future and that strategy had been “quite successful” since the ban was imposed.

It comes as Australian Bureau of Statistics data on Tuesday revealed Australia’s exports jumped 8 per cent in the September quarter while imports crept just 2 per cent higher, resulting in a $1bn surge in the account surplus to a record high of $23.9bn.

ABS head of international statistics Andrew Tomadini said the strong numbers were driven by high prices for exports of coal and other mineral fuels as well as greater volumes of agricultural exports.

Not all Aussie sectors have shrugged off China’s various trade bans, with Wine Australia’s latest export report showing a 24 per cent plunge in value to $2.27bn and 17 per cent slump in volume over the year to September.

The decline was attributed to the China woes and less wine being available to export due to small vintages between 2018–2020.

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