Chinese importers ‘avoiding’ Australian thermal coal despite claims of no ban: Credit Suisse
Despite claims of no ban, price movements show Chinese importers are shunning Australian thermal coal, say analysts.
Chinese importers are “avoiding” Australian thermal coal to the benefit of competitor nations, casting doubt on assurances from Canberra and Beijing there is no ban on the product entering Chinese ports, analysts say.
Most thermal coal is produced by Glencore, Yancoal and BHP and in a research note released by Credit Suisse today, analysts said the price falls suggest China is restricting access specifically to Australian coal.
“The price of Australian thermal coal sold to China (5500kcal high-ash) is being hit relative to competitors, at odds with assurances by the Chinese and Australian Governments that there is no ban on Australian coal at China ports,” the analysts said.
“Whether there is a ban or just restrictions, the price suggests importers are not interested in learning from experience and are avoiding Aussie thermal.”
“Prospective buyers are steering clear on the fears of being stranded with a distressed cargo if they can’t land the material in China.”
As a result Australian coal may be losing market share in China, the Credit Suisse analysts said.
“The big winner is Indonesian coal with the 4700kcal sub-bituminous index only $1 short of Aust. 5500kcal. The sharp improvement of the Indonesian price suggests it may be taking Australian market share.”
The analysts said coking coal prices remained strong as Chinese steel mills have few other options.
“Met coal price have remained strong at $214/tonne with Chinese buying continuing.”
“Anecdotally, steelmakers accept that clearance times through China customs will be slow, perhaps six to seven weeks, but they allow for that. Ultimately, steel mills have little choice as China is short of premium-grade low-sulphur coking coal.”
The analysts said the discount on Australian coal might mean it may be able to be sold to India instead.
“After China, the next likely buyer is India. India would not normally look at Australian coal as it’s usually far pricier than Indonesian material, and Indian power stations are designed to run on low-calorific-value coal. But that price differential with Australia is eroding.”
