Australia dominates China coal market despite talk of ban
If China is trying to boycott Australian coal, it is doing a terrible job of it. Figures show we dominate Beijing’s market.
If China has been trying to boycott Australian coal this year, it has done a terrible job of it.
Just look at the official numbers.
In the first eight months of 2020, Australia’s share of China’s imported coal market — that’s the combined sales of coking and thermal coal — jumped to 46.5 per cent.
That was up from 39.9 per cent over the same period last year, according to data from China’s General Administration of Customs.
Australian hasn’t so dominated the China coal market since at least 2016, back when the Australian-China relationship was still basking in the afterglow of President Xi Jinping’s visit to Canberra and the Turnbull government was yet to lead the world in banning Huawei from its 5G network.
In that sunny time, Australia’s market share over the same period was 39.2 per cent.
Clearly there are more moving parts to China’s coal market than what happens in Canberra.
One of the noisiest is China’s domestic coal sector — the biggest in the world.
As Scott Morrison noted matter-of-factly on Tuesday, “that’s not a new thing”.
“From time to time, the Chinese government will have domestic quotas to support local production and local jobs in China,” the Prime Minister said.
Those annual quotas, which industry analysts reckon are around 270 million tonnes for imports of all coal types, tend to be implemented around the end of the year.
Which is to say, right about now.
The opacity over these quotas leads to jumpiness.
That’s especially the case in Australia, where anxiety about economic exposure to China is at record levels, as will happen when a country’s major trading partner imposes retaliation on beef, barley and wine for political reasons.
Reports about a China ban on Australian coal erupted in early May this year.
And in October last year.
And in April last year.
Each time it was suggested that Beijing had given orders to buy coal from more politically agreeable suppliers, such as Russia and Indonesia.
Despite monthly volatility, the annual numbers show that hasn’t happened — or at least not in a way that has had any material effect on market share.
So far, when the value of Australia’s total exports of China has fallen, it has because the price of coal has fallen. For the first half of this year, they were worth over $7.3bn.
Beijing, it must be said, has done nothing to dispel the idea that Australia’s coal producers should beware its might.
Why would it, when the storyline is all about China’s omnipotence?
It is possible this time will be different.
Perhaps Beijing is plotting an ongoing ban, rather than its traditional end-of-year restriction, on Australian coking coal — the stuff it uses to make steel with the iron ore it imports overwhelmingly from Australia.
That will be quite a change.
As Wood Mackenzie analyst Rory Simington notes, Australia currently supplies 40 per cent of China’s premium coking coal.
Simington also notes that the domestic price for Chinese coking coal is US$192 ($267) a tonne. It’s US$146 for a tonne of the stuff from Australia.
Now prices aren’t everything, but nor are bilateral politics.
Even in the Leninist-capitalist hybrid that is Xi’s China.
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