Economy

Trade dispute looms as China 'told plants not to use Aussie coal'

Trade dispute looms as China 'told plants not to use Aussie coal'”

Several trade publications including S&P Global Platts have reported that Chinese state-controlled energy providers and steel mills had received a "verbal notice" from the government to stop buying Australian coal.

Coal was Australia's second-largest export past year, behind iron ore, worth A$55 billion ($39.52 billion).

A freight train transports coal from the Gunnedah Coal Handling and Prepararation Plant in Gunnedah, Australia, yesterday.

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Still, two traders and two analysts, speaking on condition of anonymity because of the sensitivity of the matter, pointed to China's aggravation with Australia's political positions as a factor behind the decision.

Trade Minister Simon Birmingham confirmed there had been some disruptions to Australian shipments of coal into China, but said there was no evidence to verify a full-blown import ban.

Analysts say bilateral relations could deteriorate further if China targets coal, which is Australia's leading export commodity.

Beijing has since imposed a large anti-dumping duty on Australian barley, banned beef exports from five abattoirs and instigated anti-dumping and subsidy investigations into cheap Australian wine in China.

"As such, we don't see any medium-term implications".

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"We had thought that rising domestic Chinese coal prices would reduce pressure on the administration to use trade barriers as a way to boost domestic coal prices and support local producers. Cargoes are taking a long time to be sold amid the confusion, with buyers treading carefully", Hynes said.

Newcastle benchmark thermal coal prices fell by the most in nearly four years on Monday as reports of the ban filtered through the market.

Diplomatic relations between the two countries soured in 2018 when Australia banned China's Huawei Technologies Co Ltd from participating in its nascent fifth-generation (5G) broadband network.

Australian coal shipments to China were delayed in February a year ago. China's "Golden Week" public holiday spanned October 1-7.

Australia supplied over 40% of China's total coking coal imports in 2019, and about 57% of its thermal coal.

'There have been, in the past, some issues around in relation to coal, and we've worked through those, ' he told reporters in NSW.

"We understand there may be some new developments relating to how China plans and moderates imports versus its own domestic coal production", BHP Group chairman Ken MacKenzie said on Wednesday. Export earnings from the steel-making material were already forecast to fall to A$23 billion ($16.6 billion) in the 12 months to June 30 from A$35 billion in the previous year on lower prices and weaker demand, according to a report last month.



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