Chinese bans come back to bite them – ShareCafe
Coking coal has become the latest example of China slashing the bottom line by banning imports of Australian coal (both coking and thermal type).
Chinese imports of Australian coking and thermal coals have been banned since late 2020 (officially from December, but bans and so-called customs inspections began last August).
The ban on barley imports early last year prompted the industry to seek other markets, with Saudi Arabia becoming a major market. Wine exports are slowly being diverted to other markets, meat exports continue to China, despite claims that they have been banned.
Coal shipments from Australia are now going elsewhere and, coupled with persistent problems with China’s domestic industry (which is low-quality and high-cost), there is now a shortage in parts of the country.
Domestically, the shortage is due to the fact that some mines have been closed for inspection for safety reasons, others are not functioning due to production issues and some are not functioning for official reasons (to limit the emissions).
Chinese coking coal prices are now US $ 100 higher than the Asian Basin price for similar coal from Australia, hurting the steel industry at a time when import prices for ore from iron have reached record levels and remain close.
In China, more private coal mines and a few large state-owned coal mines are now closed until July 5 in northern and eastern China for additional safety inspections and some coal mines are not do not know when they will reopen.
Additionally, coal imports are banned until the end of this month in some Chinese provinces and there is no sign of that changing, despite the government trying to keep prices low.
According to the resource websites, Russian and Indonesian suppliers are trying to push prices well above the standard Australian level of just over US $ 75 per tonne for thermal coal shipped fob in northern China.
At the same time, strong demand from Taiwan, Japan and South Korea is absorbing Australian coal that would have gone to China.
The Australian Bureau of Statistics reported this week that May saw exports of coking and thermal coal to South Korea increase by $ 120 million or 28%, and to Taiwan by $ 93 million or 35%. .
In fact, total coal exports in May rose by $ 342 million, up 10% and showing that the Chinese ban has no impact except on itself.
China imported 21.04 million tonnes of all types of coal in May, down 4.6% on the year. This brought its total imports from January to May to 111.17 million tonnes, down 25.2% from the first five months of the Covid 2020 restriction.
China imported 3.41 million tonnes of coking coal in May 2021, down 30% from the corresponding period last year and 2% from April, according to the latest data from Chinese customs from this week.
This follows a 44% year-over-year decline and a 29% month-over-month decline in imports in April.
The United States exported the largest volume of coking coal to China in April, followed by Russia, Canada and Mongolia.
China imported 974,700 tonnes of coking coal from the United States in April, more than 10 times more than 91,661 tonnes a year earlier and a 47% increase from 663,442 tonnes in March.
Russia shipped 761,287 tonnes of coking coal to China in May and during January-May 2021, China imported 18 million tonnes of coking coal, down 43% from the same period in 2020 and reflecting the absence of shipments from Australia.
Chinese premium hard coking coal of the type exported from Queensland by BHP was selling for around US $ 296 per tonne and regular hard coking coal was around $ 263 per tonne (this is on a northern basis. China the same shipping and price base for iron ore).
According to CME Group, the Australian hard coking futures price for June was US $ 174 per tonne on Wednesday.
Chinese media say there have been power supply disruptions due to a drought in southwest China, with insufficient hydropower supplies and coal-fired power plants unable to make up the difference.
Part of the problem is insufficient coal supplies as well as fears of worsening already severe smog problems by restarting existing power plants that were shut down to cut emissions in early summer.
Additionally, at least five Chinese provinces – including the largest, Guangdong – have warned this summer of power shortages that are already underway.