China officially bans Australian thermal coal

China’s National Development and Reform Commission (NDRC) has announced that it will ease import restrictions in an effort to bring domestic coal prices down and ease financial pressure on local utilities.

It also effectively altered its targeted price by suggesting utilities shouldn’t pay more than CNY640/t for thermal coal.       

However, the NDRC explicitly listed Australian coal as being exempt from the new order, confirming what has been assumed ever since reports of import restrictions on coal from Australia emerged in October.

International coal markets have been in upheaval ever since the new China policy measures.

Newcastle coal prices fell nearly 15% to approximately USD53/t in October, while Indonesia coal prices rallied.

However, as Chinese buyers adjusted their sources, other markets tightened up. This saw Australian exporters find new homes for their products. Newcastle prices have subsequently rallied more than 50% to be trading around USD85/t.

Chinese coal demand has been growing strongly along with industrial activity as the country rebounds strongly following virus-induced lockdown measure earlier this year.

China has been an important market for Australian thermal coal. It made up as much as 30% of Australia’s total exports in 2018.

This market share has been falling ever since; with the rate accelerating even before the recent restrictions.

In October 2020, only 10%, or 1.7mt of Australia’s thermal coal found its way to China.

However, the ship tracking data shows the impact the restrictions have had. Total coal exports to China have effectively stopped, with only 382kt in the four weeks to 14 December. Australian exporters have found additional buyers in South Korea, Vietnam and Japan. As such, Australia’s thermal coal exports are holding up relatively well, despite the Chinese ban.

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