Chinese firms resume coal supply talks with Australian miners

“Coronado expects Australian metallurgical coal imports to return to China in 2023, crowding out lower quality and more expensive Chinese domestic or US metallurgical coal production,” it said.

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A deterioration in diplomatic relations between Australia and its largest trading partner in 2020 saw China impose heavy tariffs on a range of Australian goods, including wine and barley, while an outright ban on Australian coal saw dozens of ships carrying the front stranded on the coast could not moor.

The ban ultimately forced a realignment of global trade flows, resulting in Australian manufacturers sending more cargo from local shores to other markets, including Southeast Asia and India.

Four Chinese state-owned companies, including China Energy Investment Corporation and Baowu Steel Group, received permission from the country’s central economic planner to resume imports from Australia in January, analysts say.

International resources consultancy Wood Mackenzie said some Australian coal shipments have since been sold to China, and rumors are aware that a full lifting of the ban could be as early as next month. Rory Simington, head of Asia-Pacific coal research at Wood Mackenzie, said lifting the ban on all Chinese importers, including trading firms, was necessary for trade to resume at full scale.

“Chinese consumers typically want to buy in Chinese currency on a delivery to factory basis… Australian manufacturers want to sell their cargo on a free on board basis [when the coal is loaded onto a vessel at the Australian port] in US dollars,” Simington said.

“Chinese traders are the key link between these buying and selling preferences.”

Simington added other “headwinds” for Australia-China coal trade, including falling Chinese domestic coal prices curbing appetite for imports and the fact that Australian producers still haven’t got much to do after a “horror” year of severe weather in 2022 had available coal for sale.

“The recent fall in Newcastle thermal coal prices suggests that at least some producers have caught up on their long-term commitments and have material available,” he said. “But in general the market remains tense.”

Coal prices soared to near-record levels in 2022 as Western nations shunned Russian cargoes to deprive Moscow of the revenue it needed to fund the war in Ukraine, intensifying competition for Australian supplies.

Australia’s coal exports, including metallurgical and thermal coal, are now expected to bring in more than US$132 billion in 2022-23, overtaking iron ore as Australia’s top export.

However, the longer-term prospects for Australia’s coal industry remain deeply uncertain as countries around the world accelerate plans to shift away from carbon-intensive fossil fuels and embrace cleaner energy sources.

If the world is to meet the Paris Agreement’s ultimate goal of limiting global warming to 1.5 degrees – the level scientists say is necessary to avoid the most catastrophic effects of climate change – Australia’s coal revenues could fall by as much as 80% by 2050 Percent collapse to the Reserve Bank.

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