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Aussie coal companies bouncing on rumour of China ban reversal

It has been almost two years since China enacted a painful ban on one of Australia’s biggest exports, but things could be about to change.

Albanese not prepared to ‘suck up’ to China

In October it will be two long years since China decided to take a huge step to punish Australia and one its key exports. But now there are rumblings that big changes are on the way.

Beijing’s ban on imports of Australian coal came at a time of great tension between the Chinese Communist Party and the then-Morrison government, and it has had a negative effect on the economies of both nations.

Australian exports account for 58 per cent of the global seaborne trade or metallurgical coal, a vital ingredient in steelmaking.

China meanwhile loves to make steel, accounting for 57 per cent of world steel production in 2020.

It has not been a good move for either nation.

Australia lost its biggest coal customer. And for China, since the ban came into effect, every million tonnes of coal used in its steel mills has cost more than $US400 million ($A590 million), compared with around $US250 million ($A370 million) paid by steel mills in other parts of the world – purely because of the Aussie ban.

However, there are rumours that China may be preparing to reverse its unofficial ban on Australian coal imports in August or September.

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China imports a huge amount of coal for its steel mills. Picture: Poornima Weerasekara
China imports a huge amount of coal for its steel mills. Picture: Poornima Weerasekara

Nothing has been confirmed yet, but Aussie coal mining companies are seeing their share prices jump in excitement over the prospect of a reversal.

On Thursday’s morning trading, New Hope jumped 7 per cent, Whitehaven gained 3.9 per cent and South32 rose 2.6 per cent.

Experts believe that China may want to do this to bring the metallurgical coal price – now about $US250/tonne ($A370/tonne) – towards the thermal coal price – now about $US430/tonne ($A630/tonne).

Shaw & Partners senior resources analyst, Peter O’Connor told The Australian: “This would go some way to redress the pricing anomaly that has recently seen met coal price – the premium coal offering – trade at a discount to thermal coal.”

China's President Xi Jinping. Picture: Selim Chtayti / POOL / AFP)
China's President Xi Jinping. Picture: Selim Chtayti / POOL / AFP)

Albanese stands firm on China demands

The rumoured reversal would signal a big breakthrough for Australia-China relations, and would be a win for the new Albanese Government.

Scott Morrison’s push for an investigation into the origins of Covid did not go down well with Beijing and further soured an already tense relationship between the two nations.

Prime Minister Anthony Albanese and Foreign Minister Penny Wong have stated they want to mend some of the damage done over the past three years.

However, the Prime Minister has said he won’t simply cave in to China’s demands to normalise trade relations once again.

Over the weekend, China’s Foreign Minister Wang Yi issued Wong with a four-point list of demands to repair the relationship and

Foreign Minister Wang Yi blamed the “irresponsible” words and deeds for the difficulties in the relationship between China and the previous government led by Scott Morrison.

“The root cause of the difficulties in bilateral relations over the past few years was the former Australian government’s insisting on regarding China as a rival or even a threat, allowing its words and deeds being irresponsible against China,” he said.

Australian Prime Minister Anthony Albanese has insisted he won’t simply cave in to China’s demands. Picture: NCA NewsWire/Gaye Gerard
Australian Prime Minister Anthony Albanese has insisted he won’t simply cave in to China’s demands. Picture: NCA NewsWire/Gaye Gerard

“It is hoped that the Australian side will seize the current opportunity and take concrete actions to reshape its correct understanding of China, reduce negative assets and accumulate positive energy for the improvement of China-Australia relations.”

It followed a meeting in Bali on Friday between Ms Wong and Mr Wang which ended a diplomatic freeze that has dragged on for three years.

Ms Wong said the meeting had been an “important first step” to “stabilise” the relationship.

While China recognised it was a step in the right direction, it has called on Australia to meet four criteria in order to better heal the relationship, including that Canberra needed to see Beijing as a “partner, rather than a rival”.

Speaking in Canberra this week, Mr Albanese said Australia will continue to co-operate with China where it can, but won’t shy away from standing up for the national interest.

“Look, Australia doesn’t respond to demands. We respond to our own national interest,’’ Mr Albanese said.

“I’ll say this. We will co-operate with China where we can. I want to build good relations with all countries. But we will stand up for Australia’s interests when we must.”

– with Samantha Maiden

Read related topics:China

Original URL: https://www.news.com.au/finance/economy/australian-economy/aussie-coal-companies-bouncing-on-rumour-of-china-ban-reversal/news-story/e738a987f0e7a7d3f5dd81c68ddaffb5