China’s potential $10 billion threat to Queensland
The economy is already hurting, with resources helping prop up the nation. But China’s latest trade threat could hit Queensland to the tune of $10 billion in a worst-case scenario.
QLD Business
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There is a $10 billion threat to Queensland’s economy from fears of Chinese restrictions on Australian coal, in a move which could hamstring the industry.
Trade Minister Simon Birmingham said he was reaching out through diplomatic channels but admitted Australia had concerns about a number of trade decisions made by China this year.
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There are reports that the import of Australian coal to China could be slowed or restricted, and that steel mills in China have been told not to buy our coal, but the seriousness of the evolving development is yet to be confirmed.
The move would cripple Queensland’s coal industry, which does nearly $10 billion in coal trade with China.
Industry sources say approval delays have been noticed for suppliers of both metallurgical and thermal coal to get access, with this typically more of an issue at the end of the calendar year as quotas get exhausted.
Import restrictions have been happening at varying levels over the past three years.
But Department of Foreign Affairs and Trade data reveals that in August this year our coal trade with China dropped to just $642 million – the lowest monthly exports in at least two years and half of what it was the same time last year. It is yet to be seen whether this will be a longer trend or a blip.
China’s foreign affairs ministry spokesman denied knowledge of the situation on Monday night.
Industry sources have said the situation appeared to still be evolving.
Queensland does $9.9 billion in coal trade with China, making up the vast bulk of Australian’s $14 billion in exports.
Japan has overtaken China as Australia’s top purchaser of coal but Queensland sells just $4.5-6 billion of the resource to Tokyo.
Relations between Australia and China have been increasingly rocky, with various trade restrictions already imposed on beef, barley and wine.
Just over two weeks ago a report from the Chief Economist said China was propping up the coal market, as the only international buyer to keep strong demand during COVID-19, even as it warned that “there remains a risk of Chinese government intervention to restrict coal imports”.
About 50,000 Australians are directly employed by coal mining.
Earlier this year, China’s state-owned media The Global Times issued a pointed warning, claiming there was a “domestic glut” in its own coal market and that this could hit Australia’s coal exports as Canberra “moves to do the US’ bidding”.
Despite the potential emerging troubles, some companies like BHP have seen their coal imports to China increase in 2020 so far.
Prime Minister Scott Morrison on Tuesday played down the reports, saying they were raising the issues with relevant authorities, but that domestic quotas were not uncommon in China.
“It is not uncommon that from time to time, the Chinese government will have domestic quotas to support local production and local jobs in China,” he said.
“I can only assume, based on our relationship and based on the discussions we have with the Chinese government, that that is just part of their normal process.”
Minerals Council Australia boss Tania Constable said trade with China changes through the year based on a range of factors, including quotas.
“Australia will continue to see demand for its high quality of coal and the medium term outlook remains positive,” she said.
Senator Birmingham said Australia had concerns over a number of decisions taken by China this year.
“China remains an important trading relationship, an important regional partner and the Australian Government continues to believe that our produce across a range of different categories provides for a mutually beneficial trading relationship,” he said.
“It supports Australia’s economy, China’s economy, but also ultimately growth and prosperity across the region, as it has for many years.”
