Mining sector pleads for Canberra to restore China trade ‘stability’

The head of Australia’s peak mining body, representing major shippers of both thermal coal and coking coal, said Australia and China had a “strong, enduring and mutually beneficial” economic relationship, particularly in high-quality minerals, and urged the Morrison government to seek to mend ties.

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“The success of this relationship has relied on a rules-based trade system, which has supported many years of economic growth and job creation,” Minerals Council of Australia chief executive Tania Constable said. “The Minerals Council of Australia encourages the Australian and Chinese governments to work together to resolve these issues and restore stability to the long-term trading relationship.”

Coal industry insiders, not authorised to speak publicly on the matter, on Tuesday pointed out that the restrictions on thermal coal shipments entering China had been in force for “several months”, with the impact already digested by the market and reflected in the spot price.

The impact of Chinese import restrictions, combined with the pandemic-led economic slowdown weighing heavily on global energy demand, have driven the benchmark price of top-quality NSW thermal coal from an average of $US100 a tonne in 2019 to as low as $US50 this year. But the price has regained lost ground in recent weeks and is now as high as $US80, according to global energy consultancy Wood Mackenzie.

As the Australia ban causes a shortage of high-quality coal in China, Wood Mackenzie’s Asia Pacific head of coal Rory Simington said coal buyers in China were being forced to pay more expensive prices for coal from other sources including Indonesia, Russia and South Africa to secure coal of a similar energy value to Australian product.

“This has allowed Australian producers to place material into less traditional markets such as India, Bangladesh, and Turkey as well as increase competitiveness into traditional south-eastern and north Asian markets,” he said.

“Australian thermal coal prices have actually bounced back strongly.”

Federal Trade Minister Simon Birmingham said China’s treatment of Australia was unacceptable and he would pursue every avenue of restitution. He said the apparent ban on coal shipments could be in breach of World Trade Organisation regulations.

Last year, Australia shipped about $4 billion of thermal coal to China and $9.7 billion of coking coal, which is used in steelmaking.

Australia’s overall thermal coal exports, which are set to fall 25 per cent this year from $20 billion to $15 billion, are also facing the threat of longer-term demand uncertainty after the local industry’s three biggest customers – Japan, China and South Korea – signed up to targets to achieve net-zero carbon emissions between 2050-60, requiring less consumption of fossil fuels in their energy mix.