Miners confident on China coal demand as import threat looms

smh.com.au Viewpoint,  Import & Export,  International,  Thermal Coal 2020-05-22 17:04:08

The mining industry and federal government ministers are confident that Chinese demand for Australian coal will remain strong due to its high quality, despite tense diplomatic relations and Chinese power stations being directed to source domestic coal instead .

As reports circulate among coal traders and analysts that the Chinese government has verbally directed five state-owned utilities not to source coal cargoes from Australia, industry representatives for Australia's top mining companies on May 22 said they would work with authorities in both countries on import and export requirements.

"Australia's high-quality coal remains in demand in China and is helping fuel its cities and factories as the country recovers from the COVID-19 pandemic," Minerals Council of Australia chief executive Tania Constable said.

"Australian minerals companies will continue to work with Australian and Chinese authorities to meet all requirements."

Deputy Prime Minister Michael McCormack said he was "very concerned" about the prospect of Australian coal exporters facing heightened restrictions selling into the Chinese market, but he was confident that the federal government and its trade officials could work through the issues in a "rational way".

"China needs Australia just as much as Australia needs China – it's a two-way relationship," he said. "We understand China is a big customer of ours. We want to make sure that not only do we retain as many of those exports... but increase them as time goes on."

The Chinese Communist Party on May 22 abandoned an economic growth target for the first time due to the uncertain economic impact of the coronavirus crisis. The number is historically a gauge for Australian resource exporters to establish how much demand China will have for their products.

Zhao Lijian, a spokesman for China's Foreign Ministry, said China always adhered to "mutual respect and equal-footed treatment" while developing friendly relations with other countries.

"We hope Australia will work with us to create favourable conditions for practical cooperation with actions that are conducive to bilateral relations and mutual trust," he said.

China's coal imports have surged nearly 27% year on year between January and April, with Beijing now seeking to tighten coal import controls in the second half of 2020 in a bid to arrest the sliding domestic prices.

Some Chinese state-owned utilities calling for near-term tenders have revised their procurement plans away from Australian coal, adding that Chinese domestic coal prices have been rising over the past week at a rate of 10 yuan ($2.15) per day as buyers switched to local product.

The Morrison government does not believe Australian coal is being singled out from other imports under the new restrictions, but federal Trade Minister Simon Birmingham and Resources Minister Keith Pitt said they would be monitoring the situation closely to ensure China was not in violation of trade obligations.

"As has been the case in the past, China appears to be continuing to place informal short-term quotas on coal imports to protect its domestic coal industry and local jobs," the ministers said.

"Industry has successfully managed these issues previously but we are monitoring the situation closely and expect any arrangements China puts in place to be WTO consistent and CHAFTA (China-Australia Free Trade Agreement) compliant."

Unofficial import quotas and port delays have become common for Australian coal exporters in China since February last year, with customs clearance times in some cases blowing out to more than 60 days.

Senator Birmingham on Friday also said he was watching developments with the US-China trade deal, after US barley exporters replaced Australian producers in the market as part of the first phase of an agreement between the two countries. China launched anti-dumping tariffs on Australian barley in May after weeks of the Morrison government lobbying for an independent inquiry into the coronavirus origins.

"If it enters into some sort of managed trade realm that appears to be in breach of WTO obligations, well then we'll be looking at that carefully," Senator Birmingham said.

(Writing by Tammy Yang  Editing by Jessie Jia)
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