China’s coal blacklisting may force Queensland and NSW producers to shut mines, with Beijing’s move crippling revenues and sparking a desperate search for new overseas markets.“We are very concerned that all Australian exports of thermal and metallurgical coal to China are currently stopped,” Orica chief executive Alberto Calderon said at the company’s annual general meeting on Tuesday.“We hope that the government can quickly re-establish constructive dialogue, build understanding of the issues on both sides and begin the process of normalising relations.”The bulk of Australian mines depend on Orica to keep their production running through its supply of bulk explosives and detonator systems, and Mr Calderon said the company had already suffered from the ban.“At this stage for the next month we are anticipating about a 10,000-tonne impact on the east coast of ammonium nitrate demand per month,” he said.“So every month that it’s not sold, it’s going to be about 10,000 tonnes. So that’s why we are urging the government to do what it can to normalise this situation.”China’s coal ban has cut more than 7 per cent of Orica’s monthly ammonium nitrate volumes for the Australia, Pacific and Asia ­regions based on its production in 2020 of 1.68 million tonnes. Australia’s official commodity forecaster estimates China’s decision to impose sanctions will spark a $17bn collapse in 2020-21 coal export revenues, spoiling record revenues for the Morrison government from booming iron ore prices.Orica chairman Malcolm Broomhead, also a director of mining giant BHP, said it was tough to forecast how the coal standoff would be resolved.“We’ve seen impacts continue into the start of this financial year and, given the constantly evolving situation, it’s difficult to predict at this point the extent of that impact,” Mr Broomhead said. “But we’re continuing to closely monitor the situation and are regularly maintaining communication with our customers.”BHP, which sells 30 per cent of its Australian-mined coal to China, has been tipped as a loser from China’s ban on Australian coal, with the ongoing rift triggering profound shifts in global commodity trading according to UBS.Mr Broomhead also said he was hopeful the Biden administration would reset Washington’s relationship with China, allowing Australia to mend its own rift.He said he hoped the incoming Biden administration “will act as a circuit breaker, and lead to a rebalancing of international relations, particularly with China, that Australia can then leverage”.Still, any thawing of trading ­relations between Australia and China on coal in the short term appears remote, according to Westpac.“We had expected these bans to be lifted in early 2021 as import quotas are reset to zero. However, while the Chinese administration has allowed imports above quotas to ease market tensions, Australian coal remains blacklisted,” Westpac senior economist Justin Smirk said.Beijing is paying a high price for its decision to abandon Australian coal with electricity shortages worsening across China, forcing tens of millions of residents in large cities to ration heating, and raising questions about how long President Xi Jinping can continue to delay delivery from a flotilla of ships holding more than $1bn of Australian coal, which feeds the nation’s power plants and steel mills.Australian producers have ­already been forced to send shipments to far-flung destinations in response to one of their biggest customers shunning supplies from Queensland and NSW mines.Eight shipments of discounted coal were sold to Turkey in the last two weeks, sparking concern among miners that China’s ban had evaporated the premium ­attached to Australian supplies while Beijing courted foreign markets that have traditionally sold little product to the Asian powerhouse.Australian producers ultimately might be able to sidestep the China ban by sourcing buyers in alternative markets, Westpac said.“Chinese buyers bid up prices for coal from other suppliers including Indonesia, Russia and even South African which hadn’t exported coal to China since 2016,” Mr Smirk said. “This allowed Australian miners to export coal to less traditional markets such as India, Bangladesh and Turkey, as well as increase competitiveness into traditional southeastern and north Asian markets.“The seaborne market is adjusting to the China ban and there is the potential for exports from Newcastle — Australia’s largest thermal coal port — to be back close to last year’s levels by early 2021 even with zero exports to China.”Orica’s Mr Broomhead also used his AGM chairman’s address to caution governments not to squander stimulus opportunities as nations look for economic growth in a post-COVID world.“Governments now have the political licence to spend unprecedented allocations of public funding and can take advantage of low interest rates,” he said.“But if we are to go into such levels of debt, we must not squander the opportunity. We urge governments to focus on initiatives that will deliver both medium and long-term returns in higher standards of living, and sustainable growth.”Orica has also been among major gas buyers pushing for the potential introduction of formal price controls to apply to Queensland LNG exporters, arguing that the intervention is justified to ­ensure a fair price of gas for big domestic users. “I commend the government for recognising the critical role that gas will play in both Australia’s post-COVID recovery and as a firming technology that will support investment in, and adoption of, new technology in the decarbonisation of our society,” Mr Broomhead said. “This is a good example of long-term vision that will both provide certainty for domestic manufacturing and provide the platform for climate resilient economic growth.”



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