Coal prices: Reason why China could lift Australia’s ban
After a two-year ban, China might be ready to buy Australian coal again – and there’s a blunt reason why it might be ready to back down.
China is considering ending its unofficial ban on Australian coal as it seeks to avoid power shortages that shut factories and caused sudden blackouts last year.
News that authorities were considering ending the ban excited investors, with share prices of mining companies surging amid the rumours.
There had been hopes Australia’s change in government would trigger a thaw in relations with China, but the change of heart may have more to do with fears of winter power shortages and rising prices coal because of the war in Ukraine.
Roland Rajah, the Lowy Institute’s chief economist, told news.com.au that Beijing’s ban has hurt China, which sources coal from Indonesia and Russia.
“China’s ban on Australian coal has always imposed costs not just on Australia but on China itself,” he said. “Now, with high coal prices, severely disrupted global energy markets and their own economy in the doldrums, they are clearly reconsidering the value of maintaining the ban.”
He said the reversal would also be good for Australia, as exporters are likely to be able to secure higher prices. He added that the change in the Australian government may have had an impact on Beijing’s decision, it would not be the main reason for a change of heart.
“I suspect these are mostly changes in China’s perceived economic interests. But China’s sanctions on Australian coal and other exports weren’t doing them anything particularly helpful anyway,” he said. he said, “So lifting the ban makes sense.”
According BloombergChinese bureaucrats are considering a recommendation to end Australia’s two-year coal ban to avoid a repeat of last year’s power cuts, which would also precede a crucial meeting of the National People’s Congress more late this year.
China introduced several tariffs and an unofficial ban on resources like coal in 2019 after then-Prime Minister Scott Morrison called for an investigation into the origins of Covid-19.
But its ban has not been as financially damaging as feared, with Australian businesses able to find new buyers.
According to a report published last year in the Lowy Institute’s The interpretercoal exports to China fell by $6 billion, but Australia’s exports to the rest of the world increased by $9.5 billion in annualized terms.
“Australian coal exporters appear to have managed to divert to other markets,” wrote Lowy Institute chief economist Roland Rajah.
Russia’s war in Ukraine has also swelled Australia’s coffers, leading to “windfall gains” for Australian mining companies, according to a report published this year by Deloitte Access Economics.
Deloitte has examined the war in Ukraine and its implications for Australia’s resource industry as part of its Investment Monitor, which analyzes major engineering and commercial construction projects.
He noted that prices for coking coal, of which Russia is a key producer – typically supplying around a third of European, Japanese and South Korean demand – hit record highs in early 2022.
The report says prices for premium coking coal in Australia peaked at nearly US$700 (A$1,000) a tonne in March.
Meanwhile, the price of thermal coal – which is burned in power plants to generate electricity – had seen similar price increases in 2022.
Even before the war in Ukraine, coal prices were expected to hit historic highs as the world ramped up business after two years of Covid shutdowns.
China’s latest deliberations come as it reopens diplomatic channels with Australian officials, following the election of the Albanian government.
But Prime Minister Anthony Albanese said Australia would continue to defend itself in its relationship with China.
“We need to cooperate where we can. But we will stand up for Australian values where we must,” Mr Albanese told a news conference earlier this month.
China – Australia’s biggest trading partner – has imposed tariffs and disrupted more than a dozen key industries, including wine, barley and coal, as relations soured over the past few years. last two years.
Canberra had upset Beijing by calling for an independent investigation into the origins of the coronavirus pandemic and banning telecoms giant Huawei from helping build Australia’s 5G network.
Australian Foreign Minister Penny Wong said she raised the trade issue when she met Chinese Foreign Minister Wang Yi on the sidelines of a Group of 20 meeting in Bali, Indonesia. .
This “remains the position of the government that trade blockages must be removed,” the minister said in Bali.
Ms Wong said she also raised the cases of journalist Cheng Lei and democracy activist Yang Hengjun, Australian citizens detained in China.
“I think all of these issues will take time,” she said. “There is a path that we follow. And we will take one step at a time in the interest of the country.
Ms Wong said Australia and China have gained a lot from their economic and people-to-people ties.
“We have our differences,” she said, adding, however, “We believe it is in the interests of both countries for the relationship to stabilize.”
Chinese Foreign Minister Wang Yi then handed Ms Wong a four-point list of things that need to be done to mend relations between the two countries.
The demands were as follows:
1. Australia must treat China as a “partner rather than a rival”.
2. The two countries must seek “common ground while putting aside their differences.
3. Australia must reject ‘third party manipulation’ – which was a clear reference to the US.
4. Both countries must build “public support infused with positivity and pragmatism”.
Mr Albanese offered a cold response to the list, telling China that Australia was not responding to requests.
“Look, Australia is not responding to requests. We are responding to our own national interest,” he said.