Canadians filling the gap as China spurns our coal: Ivan Glasenberg
Canada’s coal miners are ramping up to take advantage of Australia’s poor relationship with its biggest trading partner.
Canada’s coal miners are ramping up to take advantage of Australia’s poor relationship with its biggest trading partner, as outgoing Glencore boss Ivan Glasenberg says China is getting the coal it needs from other sources during the trade and diplomatic spat between Beijing and Canberra.
China’s informal bans on Australian coal cover both thermal and coking coal, but with energy coal prices rising as global economies rebound from the coronavirus crisis, its ban on coking coal has severely depressed the price of Australian-sourced material.
Industry sources say Chinese domestic prices sat at more than $US217 a tonne for premium coking coal last week, double the benchmark price of Australian coal.
That is probably unsustainable in the long term.
There is little doubt Canadian metallurgical coal miners are the major beneficiaries of the trade war in the short term — and perhaps in the longer term if China looks to develop alternatives to Australia’s Bowen Basin.
Canada’s Teck Resources, which produces about 26 million tonnes of high-grade coking coal from its mines in British Columbia, said late last month it was diverting spot cargoes to China to take advantage of short-term pricing.
Teck is looking to restructure its 2021 sales to increase exports to take advantage of what it said could be a $US50 a tonne premium to benchmark Australian prices.
ASX-listed Atrum Coal is one of several hopefuls developing coal projects across the provincial border from Teck’s operations, in Alberta.
Atrum is still four to five years away from production at its Elan hard coking coal project, which sits next door to the Grassy Mountain project acquired by Gina Rinehart for about $900m in her takeover of Riversdale Mining in 2019.
Atrum chief executive Andy Caruso said the trade war between China and Australia had certainly increased interest in the region.
Mr Caruso said he didn’t necessarily see China looking to open up Canadian coal mines and create a “Simandou moment” for Queensland miners, but said the situation had highlighted the need for a diversity of supply to many Chinese steelmakers, and could be a “a catalyst” for a broader push to develop alternatives to Bowen Basin coal.
“Markets including China will be looking to secure strong, high-quality resources. The dynamic over time will shift.
“They want to see diversity, and Canada certainly offers that strong alternative … now and in the medium to long term,” he said.
“It is a trigger for Chinese and other buyers to rethink their longer-term supply sources.”
Mr Glasenberg said Glencore’s trading arm was looking beyond Australia to fill Chinese orders as its Australian mines had been frozen out of deliveries, with no end in sight to the impasse.
While reports indicate a small number of cargoes of Australian coal were unloaded at Chinese ports last week, sources have downplayed suggestions the move could be a sign of a thawing in relations between the two nations.
As of last week about 78 vessels carrying Australian thermal and metallurgical coal were still stuck off the coast of China’s ports, collectively holding more than 8 million tonnes of product destined for Chinese customers.
Four vessels unloaded Australian metallurgical coal last week at Chinese ports.
However, it is understood three of these were South Korean, and the decision to allow them to berth came after the South Korean government approached Chinese authorities asking that the ships be allowed to dock and depart to allow for relief of crews stuck aboard for lengthy periods.
Speaking to reporters on Friday, Mr Glasenberg did not indicate he saw any end in sight to China’s ban on Australian coal products, saying other countries were taking advantage of the situation.
“We’re not selling from Australia at the moment — as you well know, they’re not discharging Australian coal — but we are selling from other destinations,” Mr Glasenberg said.
“A lot of coal is moving from Colombia, from South Africa, from Russia, from Indonesia.
“China will still import about 185 million tonnes of thermal coal this year, which is similar to last year. I think they will maintain that target.
“So what Australia is losing is coming from other sources of supply.”
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