A coal market only just rebounding from the lowest price in four years might now need to grapple with the prospect of China renewing its restrictions on Australian supplies.
Two influential coal industry publications within China have raised the specter of the country tightening imports from Australia, which comes along with recent tensions between the two nations over the roots of the global pandemic.
Chinese officials are already considering targeting the nation’s exports including wine, dairy and seafood, according to people familiar with the matter, after Australia raised Beijing’s ire by calling for an investigation into the origins of the coronavirus.
The coal rumors are bringing back memories of early last year, when China slowed customs clearance of Australian supply amid speculation that Beijing was retaliating against a ban on Chinese telecommunications giant Huawei Technologies Co.
“Rumours of a ban on Australian thermal coal to China have surfaced in the thermal coal market this week,’ said Rory Simington, coal market analyst at consultancy Wood Mackenzie Ltd.
In a meeting last week with officials from China’s top economic planner, the National Development and Reform Commission, “five major state-owned utilities were said to have been directed to stop buying new cargoes of Australian thermal coal from May 15,” Simington said.
The NDRC didn’t immediately respond to a fax seeking comment Friday.
BEIJING CONTROLS
After coal imports surged earlier this year as lockdown measures reduced mine output, speculation has built that China is now throttling back imports to rebalance the market and stabilize prices. Beijing often uses import controls to try to keep prices in a range that is high enough for domestic miners while low enough for power generators.
“We are aware of informal quotas being imposed from time to time, locally in China. That is not a new development,” Australian Finance Minister Mathias Cormann said in a Sky TV interview on Friday.
On Tuesday, industry site MySteel.net reported “market chatter” that Chinese power plants may have been ordered to cease importing Australian coal. On Wednesday a publication affiliated with the China Coal Transport and Distribution Association speculated that the government may tighten Australian imports.
Rumors of the restrictions are coming as coal prices are starting to rebound after hitting the lowest level since 2016 on weak demand following the pandemic. Futures for coal loaded in Newcastle, Australia, settled at $57.05 a ton on Thursday, up 12% from the low on April 27.
WoodMac’s Simington said any new restrictions were unlikely to have a major market impact. “Thermal coal imports into China have been subject to numerous restrictions, quotas and import bans in recent years, however the actual impact on trade has been comparatively minor.”