Australia's coal bonanza at risk as Chinese import 'ban' spreads

(The Guardian, 21 Mar 2019) Hold-ups reach southern ports as analysts warn that trade could dry up amid China restructuring and diplomatic tension.

The number of Chinese ports restricting or delaying Australian coal imports has continued to rise, threatening to end the export bonanza that is bloating federal coffers and signalling possible painful long-term structural change to the economy.

In an ominous development for Australia’s trade balance and federal budget, traders and buyers in China reported on Thursday that the hold-ups for Australian shipments that began in February have spread from the northern port of Dalian to Fuzhou in the south-eastern Fujian province and Rizhao in Qingdao.

Industry news agency Platts reported one market source as saying that Australian thermal coal used for power generation has been “largely forgotten” by Chinese buyers as they switched preference to delay-free imports from Indonesia and Russia.

The reports have seen a sharp drop to the share price of Australian pure play coalminers. New Hope Corporation shares were down more than 20% this week after it warned of a sharp fall in exports bound for China, while Yancoal has fallen 9%.

But the impact will not be limited to the coal sector. The commodity is Australia’s second biggest export earner and demand from China accounts for 3.7% of Australian GDP – although half of that comes from exports of coking coal, which is used for steel production.

The benchmark price for high-energy Australian thermal coal has enjoyed a buoyant couple of years of prices above $100 a tonne. The figure has now dropped below $US90 a tonne for the first time in almost two years, threatening some of the export-duty windfall Josh Frydenberg can expect to highlight in his budget next month. A steep fall could also hurt the Australian dollar.

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The Guardian, 21 Mar 2019: Australia's coal bonanza at risk as Chinese import 'ban' spreads