China state links no help for Australian coal producer Yancoal
Australian coal producer Yancoal, controlled by China, has fallen victim to Beijing’s ban on imports and has been forced to find new markets.
Australian coal producer Yancoal, controlled by China, has fallen victim to Beijing’s ban on imports of the fossil fuel and has been forced to find new markets for its supplies.
Yancoal, which runs or owns stakes in 11 mines across Australia, has seen the coal bans slash its new Chinese sales to zero.
Speaking at the Sydney Mining Club on Thursday, Yancoal chief executive David Moult said the miner had last delivered a shipment to China in October.
Despite Yancoal’s state links, it was “treated the same as any other company”, Mr Moult said.
“In the last few months we’ve had problems shipping coal into China and as a result we’ve been looking to diversify,” he said.
China has generated on average 16 per cent of Yancoal’s sales revenue during the past five years.
The resources company, dual-listed on the Australian Securities Exchange and the Hong Kong Stock Exchange, is 62 per cent owned by Yanzhou Coal Mining, which is majority owned by the Yankuang Group, China’s fourth largest state-backed coal miner.
Yancoal, the largest locally listed pure-play coal company, with a market capitalisation of around $3bn,said it expected to produce about 38 million tonnes of coal last year and now must find a new market for its Chinese exports.
Mr Moult said many of the shipments previously destined for China were going largely to India and Vietnam. “We’ve looked around and picked other markets,” he said. “We want to be back in China as well.”
The Chinese hostility to Australian coal exports has sent ructions through the global market, with other countries scrambling to gobble up Australia’s slice of the Chinese market.
More recently, however,the price for Australian hard coking coal has leapt from about $100 a tonne to more than $150 since the last days of January.
This has been coupled with a resurgence of optimism in the coal industry after several vessels with Australian coal were allowed to discharge their holdings in Chinese ports last month.
Reports also have been circulating of Australian coal being re-exported from other countries, in a bid to work around the bans.
Mr Moult said the recent discharge of coal was an encouraging sign but Yancoal had “no official comment as to whether that’s a change of attitude”. However, he said recent coal price spikes in China could see the government relent on its bans.
“You see what’s happening internally in China when it comes to coal pricing,” he said.
The chief executive’s comments came after Morgan Stanley analysts poured cold water on any price exuberance in a recent note, saying last month’s port discharges were “more the exception than the rule”.
“Without China opening up for Australian coal again, we don’t think the current price rally is sustainable,” the Morgan Stanley analysts said.
“Our base case assumption remains that China will still reverse the current restrictions during (the first half of 2021).”
Morgan Stanley also noted increasing shortages of coal in China would not be enough to “undo the ban”.
“While China remains on the sidelines for Australian hard coking coal, demand from other importers, most notably India and Japan, is gradually returning to pre-COVID-19 levels,” they said.
Mr Moult said the high-level links between Yancoal and its Chinese state-backed enterprises had done little to shed light on the situation or provide any sense of when the ban may end. “We have very senior Chinese people in our company who talk to government agencies,” he said.
Mr Moult said he was at a loss to predict where the Chinese market would be in six months.
“We have a lot of coal that is suitable for that market,” he said.
“We like China as a market, they’re good buyers. They buy coal that’s quite important for us to sell and they pay good prices for it.”
But Mr Moult said the Chinese links with Yancoal still demonstrated the fruitful relationship cross-country investments could yield.
“We believe we are possibly one of the best examples of Chinese investment in an Australian company,” he said.
