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China Starts Buying Australian Coal As Unofficial Ban Ends

China Starts Buying Australian Coal As Unofficial Ban Ends

China has started buying Australian coal this month, signaling the end of an unofficial ban that ran for over two years, according to market sources and S&P Global Commodity Insights data.

S&P Global reported last month that three Chinese state-owned power plants -- China Datang Corp., China Huaneng Group Co and China Energy Investment Corp. -- as well as steel producer China Baowu Steel Group Corp. have received intimations from the government to import Australian coal.

Data from S&P Global Commodities at Sea shows around 1.4 million mt of coal was loaded from Australia for China in about 14 shipments.

While the ban was expected to be relaxed on a miner-to-end-user basis and not for general trading purposes, many said standalone traders have also been able to procure Australian coal this month.

"From what we know, not just the four Chinese companies, but traders have also been inquiring for Australian coal, which means there is room for them to execute trades," an Indonesia-based trader said. "This might not impact Indonesian coal as for low-CV requirements, China will have to look around in Asia."

Chinese coal buyers have been on the sidelines due to rising COVID-19 cases and Lunar New Year holidays, as a result of which Indonesian coal demand has remained lackluster so far. The FOB Kalimantan 4,200 GAR kcal/kg coal was last assessed at $67.50/mt Feb. 21.

Market participants expect China to start procuring more coal from March onward to stock up for summer demand and due to the expected rise in industrial activity after the relaxation of lockdown measures.

"When trade resumes after a long gap, it takes some time to catch up, not to forget China's domestic consumption is also going good. One thing is certain that the trade relations between these two countries are on the path to recovery," a Southeast Asia-based miner said.

Platts, part of S&P Global, assessed Newcastle 5,500 kcal/kg NAR coal with 23% ash at $118/mt FOB Feb. 21. Demand for Newcastle high-ash coal weakened in 2022 from India and Southeast Asia as buyers looked for more competitively priced alternatives.

Ban rejigged trade flows

China raised its coal imports from other global origins -- Mongolia, Russia, the US, Canada, Columbia and Indonesia -- post the ban in October 2020, boosting prices of those coal grades in 2021. The ban also led Chinese buyers to rely on domestic coal, with most opting for long-term agreements with domestic mines to ensure steady supply. Chinese domestic mines have said they will ramp up production in 2023.

Following the ban, Australian sellers looked at markets like Japan, South Korea and Taiwan.

Australia exported 92.1 million mt of thermal and coking coal to China in 2019, S&P Global data showed. Exports fell to 70.6 million mt in 2020.

Although China is set to reimpose import tariffs on various coal grades from April 1 after it temporarily removed duties for a year until March 31, 2023, Australia is expected to be exempt from those taxes and that would make Australian coal more attractive to Chinese buyers.

original source: https://www.win-road.com/news/china-starts-buying-australian-coal-as-unofficial-ban-ends/

Media Contact
Company Name: Win Road International Trading Co., Ltd.
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