China’s desperate backflips on Australian coal
A bitter trade dispute between China and Australia helped spark a coal shortage – and now Beijing has been forced to backflip.
China, in the grip of an energy crisis, has started offloading shipments of Australian coal despite an unofficial import ban.
Extreme weather conditions, increased demand and strict orders from Beijing to reduce carbon emissions have triggered an electricity crisis in China.
Aluminum smelters, textile producers and soybean processing plants were ordered to slow down or shut down completely last week as rising demand pushed electricity prices to record highs .
More than a dozen provinces and regions have been forced to impose restrictions on energy use in recent months.
And China’s stock of thermal coal – which is used to generate electricity – is at an all-time high.
The crisis forced China into a massive backflip.
Nick Ristic, chief dry cargo analyst at Braemar ACM Shipbroking, told the Financial Time that a handful of Australian ships waiting outside Chinese ports had headed for the mooring last month and there were signs that coal had been unloaded.
He said 450,000 tonnes of coal had been unloaded. Meanwhile, energy research firm Kpler reported that five ships unloaded 383,000 tonnes of Australian thermal coal in China last month.
Sino-Australian trade war
China is in desperate need of boosting its coal supply to avoid an economic slowdown. But Beijing’s icy relationship with Australia makes that problematic.
“While China clearly needs as much coal as it can get its hands on to avoid a slowdown over tyranny of power shortages, geopolitical tensions with Australia have put the most practical source at risk. of high calorific coal from below, ”he added. economy in Mizuho, Vishnu Varathan, said CNBC.
The increasingly acrimonious trade dispute between China and Australia has escalated, with the two countries launching actions with the World Trade Organization.
China was upset when Australia imposed anti-dumping duties on Chinese stainless steel sinks. He became furious when Huawei was excluded from the 5G rollout in Australia and Australia called for an independent investigation into the origins of Covid-19.
Beijing has imposed high tariffs on barley, wine and other Australian products, heavy restrictions on beef, and warned students not to study in Australia. Even Australian beer has been targeted by China.
He also ordered energy companies and state-owned steel mills to stop importing Australian coal last year, creating a huge hole in the Australian export market. Australian coal exports to China were worth $ 14 billion in 2019.
Australia’s coal exports to China have fallen to “effectively zero,” according to Wood Mackenzie.
And many ships carrying Australian coal found themselves stranded outside Chinese ports.
In December of last year, around 1,600 sailors aboard 80 coal-carrying ships were suffering “with no end in sight”.
But now China has quietly started unloading coal that has been stuck in Chinese terminals for months.
There are also reports that the coal in China is being sold back to India.
High-quality Australian coal is sold – at a discount of $ 12 to $ 15 – to Indian cement and sponge iron factories, mining.com reports.
Indian companies have reportedly purchased nearly 2 million tonnes of Australian thermal coal from Chinese warehouses.
“Strong signal” China worries
Meanwhile, China’s major state-owned energy companies have been ordered to ensure an adequate supply of fuel for the coming winter at all costs.
Bloomberg News, citing people familiar with the matter who did not want to be named, reported that Vice Premier Han Zheng had told energy companies to make sure there was enough fuel to run the country and that Beijing would not tolerate blackouts.
Han, who oversees the country’s energy sector and industrial production, was speaking at an emergency meeting this week with officials from the Public Assets Regulatory Agency and the Economic Planning Agency of Beijing, residents said.
“This is probably a strong signal that China is concerned about sustaining the industry, and more importantly, winter is just around the corner,” said Jeffrey Halley, senior market analyst at OANDA.
Almost 60% of the Chinese economy is fueled by coal. It is also the biggest emitter of carbon dioxide on the planet.
The country’s environmental agenda is further exacerbating the crisis, with pressures to slow coal combustion and cap coal mining growth after President Xi Jinping pledged his country would become carbon neutral by 2060.
Data released Thursday showed activity at the Chinese plant contracted last month for the first time since February 2020, when the country was essentially shut down with closures as authorities tackled the first coronavirus outbreak. .