Australia is “deeply concerned” by reports of Chinese restrictions on its coal

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Australian Commerce Minister Simon Birmingham said on Tuesday that he was “deeply concerned” by new Chinese state media reports that the country’s top economic planner has effectively banned certain coal imports from Australia. The Global Times, a state-run tabloid, reported last weekend that the country’s National Development and Reform Commission approved power plants to buy coal abroad without restrictions, except in Australia.

If true, the reports “would indicate discriminatory commercial practices deployed by the Chinese authorities,” Birmingham told Australian National Radio. China has already banned or slapped tariffs on other Australian exports.

Asked by reporters on Tuesday about the reports, China’s Foreign Ministry addressed questions to the “competent authorities.” But spokesman Wang Wenbin did acknowledge that “recently the Chinese authorities have taken relevant action against some Australian products exported to China in accordance with the law and regulations.”

Australian Prime Minister Scott Morrison, meanwhile, told reporters in Australia on Tuesday that the government was “seeking clarification” on the reports, adding that the country had not yet heard from the Chinese government. He has called reports that China is blocking Australian coal a “bad result for the trade relationship” between the two nations.
Australia is out of recession. He must now avoid a trade war with China

Relations have deteriorated since April, when Morrison called for an international investigation into the origins of the coronavirus pandemic. Beijing then called the move a “political manipulation.”

In the months since, China has hit Australian winemakers with heavy tariffs and banned or taxed exports of other products, including beef and barley.

Morrison said Tuesday that Australia sends A $ 4 billion ($ 3 billion) of thermal coal to China each year, adding that Japan is a larger market than China for these exports. Thermal coal is mainly used to generate energy. In total, Australia exported about $ 14 billion ($ 10.5 billion) to China during fiscal year 2018-2019.
But the impact on trade of any move against Australian coal is difficult to measure. Australian media reported weeks ago that hundreds of millions of dollars of coal were already being held off the coast of China, indicating that Beijing was at least putting informal pressure on Australia’s vital mining industry.

“This opacity makes it difficult to say what escalation this news entails,” said Sean Langcake, a senior economist at Oxford Economics, noting the existing disruptions in the thermal coal trade. “It’s clear they haven’t been resolved and it’s hard not to see this news as further deterioration.”

Investors in major Australian coal producers see the reports as a bad sign. Shares of Coronado Global and Yancoal Australia fell more than 8% on Tuesday in Sydney. Whitehaven Coal fell nearly 6% on Tuesday and has dropped 10% so far this week.

ANZ Research analysts wrote in a research note that Chinese reports confirm “what has been assumed since reports of coal import restrictions from Australia appeared in October.” They noted that while China has been a major market for Australian thermal coal – accounting for almost a third of Australia’s total exports in 2018 – this market share has been declining since then.

“Australian exporters have found additional buyers in South Korea, Vietnam and Japan,” analysts wrote. “As such, we see Australian thermal coal exports holding up relatively well, despite the Chinese ban.”

Economists have pointed out that other mining materials, mainly iron ore and coking coal used in steelmaking, are a particularly important part of Australian exports. Langcake told CNN Business earlier this month that restrictions on these exports are unlikely, given the dependence on the Chinese steel industry. (Iron ore prices have traded at their highest levels in years, in part due to rising demand as China recovers from the pandemic).

– Angus Watson contributed to this report.

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