The partial lifting of China’s coal ban has been met with cautious optimism, but questions remain.
When China made the decision to ban imports of Australian coal (among other items) at the end of 2020, the country said it was acting in line with Chinese laws and regulations.
And while then-Australian Prime Minister Scott Morrison said the ban on coal would be in breach of World Trade Organisation rules, the decision stood and China was effectively no longer a customer for Australian thermal and coking coal.
Until last week.
News emerged on Thursday January 5 that as China was seeking more coal for its power and steel plants amid disruptions caused by the Russia–Ukraine war, it was planning to partially lift the ban and allow three central government-backed utilities and the country’s top steelmaker to resume imports.
According to two people familiar with the matter, China’s National Development and Reform Commission held talks this week on proposals to allow four major importers – China Baowu Steel Group Corp., China Datang Corp., China Huaneng Group Co. and China Energy Investment Corp – to make new purchases in 2023.
That news was seemingly confirmed with reports that China Energy Investment Corp has placed a breakthrough order for Australian coal, though it should be noted that “several mining industry sources in Australia still said … they were waiting for firm proof of a change in policy”.
But assuming there is fire to all of this smoke and China is lifting its ban, what does it mean for the Australian coal industry?
According to the Federal Government and other industry players, not as much as one might think given Australia has redirected its coal supplies elsewhere in the past two years.
“The Australian coal industry has been successful in finding alternative markets,” a spokesperson for Federal Resource Minister Madeleine King said last week.
Queensland Resources Council (QRC) Ian Macfarlane echoed that sentiment. While the QRC would welcome the lifting of the ban, he said, the industry has done a good job of diversifying its customer base.
“It is worth noting that increased exports to other countries, particularly India and (elsewhere) in Asia, over the last two years have seen long-term relationships built with these countries,” Macfarlane said.
“These alternative markets to China are now seen by Queensland coal exporters as stable, long-term customers for Queensland coal.”
While ASX-listed coal stocks rose on news of the ban potentially being lifted, expectations of a major boost for exporters were more muted the following day and the overall market rose just 0.6 per cent.
As it happens, Australian coal has been doing quite well over the past couple of years despite not having China as a customer. In fact, coal has outpaced iron ore as Australia’s top export earner.
The ongoing energy crisis has pushed prices to historical highs and Australia’s combined coal exports, which includes metallurgical coal and thermal coal, are forecast to earn $132 billion in 2022–23.
“Many Western nations are having to pay substantially more for energy, on the high chance that sanctions on Russia will see some Russian production – particularly gas and coal – become stranded from world markets,” the Australian Government’s Resources and Energy Quarterly: December 2022 stated.
All of this would suggest that while another export avenue would be welcome, China as a customer for Australian coal may not be not as important as it once was and any gains would be relatively modest.