By Nick Toscano
Bulk carriers bound for ports in China have begun returning to one of the eastern seaboard’s largest coal terminals, in the latest sign Beijing’s unofficial two-year ban on Australian shipments of the fossil fuel is easing.
After China permitted three state-owned power utilities and a steelmaker to source coal from Australia again earlier this year, expectations have been building across the mining industry that a complete lifting of the ban is possible within weeks.
Coal miners are cautiously optimistic that Beijing could be preparing to lift its unofficial two-year ban on Australian coal.Credit: Glenn Hunt
“There are early signs that the informal ban on Australian coal imports to China may be in the process of being removed,” Dalrymple Bay Infrastructure, the ASX-listed owner of Queensland’s busiest metallurgical coal port, said on Monday.
A deterioration of diplomatic ties between Australia and its biggest trading partner in 2020 led to China slapping hefty tariffs on a range of Australian goods, including wine and barley, while an outright ban on Australian coal left dozens of vessels stranded off the coast unable to dock.
It ultimately forced a realignment of global trade flows, leading to Australian coal producers sending more cargo into other markets.
Dalrymple Bay’s Hay Point port on the central Queensland coast shipped 53.3 million tonnes of coal in 2022, of which three-quarters were sent to Japan, South Korea, Europe and India.
However, the company told investors on Monday that “China-destined vessels” had been arriving at the port throughout February.
Several coal producers in the NSW Hunter Valley and Queensland have confirmed Chinese buyers have asked about supplies of thermal coal, which is used in power generation, and metallurgical coal for the steelmaking industry during the past two months.
New Hope Group, an ASX-listed coal miner, reported an uptick in inquiries from China, although it does not have spare coal volumes to sell.
“While China has not been a substantial export market for New Hope in recent times, we have seen a notable increase in inquiries from Chinese customers in recent weeks,” a spokesperson said.
In Queensland, metallurgical coal producer Coronado told shareholders last month it had received inquiries from China and it anticipated Chinese steelmakers would be able to buy coal from its Curragh mine this year.
International resources consultancy Wood Mackenzie said some Australian coal cargoes had recently been sold into China, and it was aware of rumours that a total lifting of the ban was possible as early as March.
Wood Mackenzie head of Asia-Pacific coal research Rory Simington said removing the ban for all Chinese importers, including trading companies, was necessary for full-scale trade to resume.Other headwinds for Australia-China coal trade included falling Chinese domestic coal prices limiting appetite for imports, and the fact Australian producers still did not have much available coal to sell following a “horror” year of severe weather disruptions in 2022.
“The recent fall in Newcastle thermal coal prices indicates that at least some producers have caught up on their long-term commitments and have some material available,” Simington said. “But, in general terms, the market remains tight.”
Coal prices surged to near record levels in 2022 as Western nations shunned Russian cargoes to starve Moscow of the revenue it needed to fund the war in Ukraine, intensifying competition for Australian shipments.
Coal exports, including metallurgical and thermal coal, are now forecast to earn more than $132 billion across 2022-23, overtaking iron ore as Australia’s top export.
Still, the longer-term outlook for the coal industry remains deeply uncertain as countries speed up plans to move away from carbon-intensive fossil fuels and embrace cleaner sources of energy.
If the world is to meet the Paris Agreement’s ultimate aim of limiting global warming to 1.5 degrees – the level scientists say is necessary to avoid the most catastrophic effects of climate change – Australia’s coal earnings could collapse by up to 80 per cent by 2050, according to the Reserve Bank.
Dalrymple Bay Infrastructure told shareholders on Monday its full-year revenue had risen 24 per cent to $626 million in 2022, while full-year profit halved from $129 million to $69 million.
“The Dalrymple Bay Terminal remains a critical link in the global steelmaking supply chain and a key asset in the Queensland and Australian economies,” chief executive Anthony Timbrell said.
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