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Coal communities

A breakthrough Australian coal order from China Energy Investment Corp may open the door to further deals in the near future, though experts have urged caution.

The deal, initially reported late last week, is the first since China lifted its two-year ban on importing Australian coal.

The easing of the ban comes as China is looking to expand its options for obtaining more coal for its power and steel plants amid disruptions caused by the Russia–Ukraine war.

While the order reportedly placed by China Energy Investment Corp represents a potential milestone, “several mining industry sources in Australia still said on Friday they were waiting for firm proof of a change in policy”, according to the Australian Financial Review.

“One Chinese steel mill (indicated) it was not assuming any official change in the policy until an actual trade occurred involving Australian coal,” the AFR stated.

“Australian mining sources also said they were yet to get any verification from traders, shippers or official sources of any change in China’s unofficial ban on purchasing Australian coal.”

Once coal trading between China and Australia is officially back up and running, industry experts expect volumes to be relatively small.

Prior to the October 2020 ban, which came about amid escalating hostilities driven by disagreements over public health matters relating to the origins of COVID-19, Australia had been China’s second-largest coal supplier.

China’s desire for coal comes as it continues to emerge from its stringent zero-COVID policy, which brought much the country – including its construction and housing markets – to a standstill.

The policy change means the resumption of those industries and an increased hunger for high-quality coal to meet demand for areas such as steel and electricity.

News of the first order for Australian coal offers further evidence of thawing relations between China and Australia, with foreign ministers from each country meeting last month.