Why China’s Australian coal ban has been a ‘disastrous failure’

Beijing may soon be forced to temporarily lift its unofficial sanction against Australian coal and instead pay inflated prices for it.

China is facing an ongoing power crisis and rolling outages as it sticks to its snub of Australian coal, with exports dropping to less than one per cent of what it was.

The coal ban has been described as a “disastrous failure” by one foreign policy expert who said desperate Beijing could be forced to temporarily lift its unofficial sanction and pay for Aussie coal at inflated prices due to the risk of blackouts it wants to avoid.

Just $24.8 million in metallurgical coal, used for making steel, was traded to the super power in the first quarter of the year, compared to $2.04 billion the year before, according to Department of Industry responses to Senate estimates questions.

New data shows that no Australian thermal coal was exported to China in the first quarter of this year, compared to $1.04 billion in the same time 2020.

Coal at the Port of Brisbane. No Australian thermal coal was exported to China in the first quarter of this year. Picture: AAP image/John Gass

China has been facing power shortages and turned to rationing electricity in some parts, as Chinese industry ramps up production in the wake of the pandemic, and demand increases as winter approaches, combined with a coal shortage in the country.

Australian Strategic Policy Institute director Peter Jennings said while politically China would want to source its coal from elsewhere, other markets it would normally turn to like Mongolia and Indonesia are dealing with supply issues.

“This demonstrates the failure of Beijing’s attempts to coerce us,” he said.

“The intent was to punish Australia and to make us submit ourselves, but it hasn’t worked. It helped a lot of our industries diversify and it’s punished Chinese consumers.

“As much as they may not want to do it, they may considering taking Australian exports at that bubble price.

“It’s been a disastrous police failure for (China’s President) Xi Jinping.”

Australian Strategic Policy Institute director Peter Jennings. Picture: AAP Image/Mick Tsikas

But Mr Jennings warned local producers that any new purchases would likely only be short term.

Treasurer Josh Frydenberg last week said Australia had found new markets for 90 per cent of its product.

Resources Minister Keith Pitt said Australian thermal coal was already fetching record prices, topping $US200 a tonne, saying it was in demand as a reliable, dispatchable energy.

“Our coal sector has done a remarkable job in the face of challenges over the past year opening up new markets, and expanding existing ones, and is now reaping the rewards,” he said.
“The shortfall in coal exports to China has now been balanced out by increases in sales to other markets, particularly throughout Asia.

“Forecasts released last week indicated Australian resources and energy exports will hit a record high of close to $350 billion this financial year and coal will be a significant contributor to that.”