December 5, 2023

A bulldozer pushes coal into a conveyor belt at Jiangyou Power Plant on January 28, 2022 in Jiangyou, Mianyang City, Sichuan Province, China.

Liu Chongjun | China News Service | Getty Images

Chinese customs data showed that China has finished clearing a stranded Australian coal backlog of over $1 billion.

But analysts say it is not likely that Chinese coal buyers will start buying new supplies of Australian coal any time soon. That’s because coal stocks have been piling up, domestic production is higher, and there is now a higher supply from exporters like Russia that is being bought at a discount.

Since October, Beijing has been Stranded Australian coal shipments are unloading outside Chinese ports after the world’s second-largest economy suffered one of its worst blackouts. registered.

Power outages swept across China after power plants cut electricity production to avoid losses as coal prices soared.

In 2020, China imposed restrictions on Australian coal exports and other goods after diplomatic fallout between the two countries. Many ships on their way to China were stranded off the coast of China and were unable to dock.

At the height of the crisis, more than 50 ships could be seen sitting outside ports, according to tracking by commodity intelligence group Kpler and Bloomberg.

Chinese customs data showed that by March, more than 14 million tons of coal worth about $1.3 billion had been unloaded and dumped.

More than 8 million tons were from coke which was necessary to produce steel, while about 6 million tons were from thermal coal that generated electricity.

Since then there have been no further imports of Australian coal, according to Chinese customs.

despite of Melting of relations between the two countriesAnalysts say adequate coal stocks domestically and lower demand for coal – particularly in the Chinese steel industry – mean there is less likelihood that China will need to resume Australian coal purchases in the short term.

Due to the slowdown in the Chinese economy caused by the Covid lockdowns, steel demand has also been weaker in recent months.

“There may be some demand for very high quality [Australian] Coke in the medium term and certainly in the long term, but for now I’m not sure the Chinese will be keen to push current prices given how weak the steel market and steel margins are,” commodity strategist at Astris Advisory KK Japan Ian Roper said.

Trade battle between Australia and China

While Chinese restrictions have reduced some trade between the two countries, most of their A$250 billion ($172.35 billion) bilateral trade has remained the same.

There have been some recent signs of improving relations between the two countries after the election of the new Australian government, raising hopes among exporters and importers that normal trade can resume.

After the Australian elections, Chinese Premier Li Keqiang congratulated the new Australian Prime Minister Anthony Albanese, who approved the letter with a return note.

The defense ministers of the two countries also met on the sidelines of the Shangri-La Dialogue in Singapore earlier this month.

Can Australia and China restore trade relations?

There may be some demand for higher quality coke in the medium term and certainly in the long term, but for now I’m not sure the Chinese will be keen to push the current prices given how weak the steel market and steel margins are.

Ian Roper

Astris Advisory KK Japan

China also boosted its domestic coal production in the wake of the blackout crisis, and increased domestic stocks.

The latest data from China’s National Bureau of Statistics showed that between January and May, raw coal production rose 10.4% year on year to 1.81 billion tons, while imports fell to about 96 million tons – down 13.6% from a year ago. Ago.

Steel production in China has fallen in recent months due to slowing construction activity as the Covid lockdowns spread. As a result, coke stocks in particular rose.

In the longer term, Beijing – which has pledged to cut emissions – plans to cut steel production to meet its targets by 2030 and 2060, thus reducing demand for coal.

In other words, the sector is changing too – particularly given the global drive towards climate change, said Australian Export Council President Diane Tipping.

Even if some Chinese demand returns, Teabing added, it may not be possible for Australia to sell to China if alternative markets and new supply contracts are found for other buyers.

However, at the right price, Australian exporters will remain eager to sell to China when driven by market forcesAnd the Tipping said.

Attila Wednell, managing director of business consultancy Navigate Commodities, agreed.

Sales will occur when there are sufficient commercial benefits For both parties, he said.

“China will likely have one eye on captive cheap Mongolian and Russian coke in the low to mid-range, while keeping an eye on more attractive prices for premium Australian material,” Wednell said.

“Given the lack of reasonable premium volumes available to China, this may encourage relevant departments to thaw relations sooner rather than later.”

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