Crisis talks as China trade turmoil escalates
The nation’s top miners have held crisis talks over escalating trade tensions with China.
The nation’s top miners have held crisis talks over escalating trade tensions with China, as ship owners holding black-listed Australian coal off the Chinese coast threaten legal action over the mounting costs of a ban that has crunched the nation’s second biggest export industry.
A number of Australia’s biggest producers discussed the ongoing rift with Beijing as part of a phone hook-up on Tuesday with the Minerals Council of Australia, which represents many of the country’s big coal and iron ore producers.
The talks are understood to have focused on developing a united strategy between industry and government to ease tensions, recognising the troubled relationship may take some time to repair given China’s retaliatory stance.
Beijing has all but formalised the black-listing of Australia coal to the world’s biggest energy consumer, devastating the $14bn export industry.
Among the most visible measures causing consternation among Australian producers and government officials is the Australian coal flotilla stuck off the Chinese coast, which remains 70 ships strong and carries black-listed cargo worth more than $1bn.
Foreign ship owners have started imposing additional costs and even threatening legal action against Chinese buyers over the stand-off, with some vessels now stranded offshore for months on end, sources told The Australian.
Technical damage to ships unable to move for months, along with mounting crew wages, may be passed on to Chinese buyers of Australian coal with some owners worried about the financial impact if they fail to receive any compensation.
Some 74 ships “laden with Australian coal are waiting to discharge in China amounting to 8.7m tonnes of coal,” shipbroking firm Braemar said on Tuesday. “Since last week, four ships have joined this queue, while one has sailed to Japan and another to South Korea, presumably as cargoes have been sold on to new buyers.”
One of the vessels is an Indian-flagged vessel packed with Australian coal which has been prevented from leaving Chinese waters, even after Japan offered to accept the ship’s cargo to end the more than five-month standoff.
The ban on Australian coal has played into the hands of Australia’s competitors, who have boosted their supplies.
“Limits on imports of high quality coal from Australia have sent Chinese buyers searching for volumes elsewhere, such as Russia, Indonesia and the US, but with supply extremely limited, prices have soared,” Braemar said.
Australia and China must resolve a coal ban and use a rules-based system to restore stability to their trading relationship, the Minerals Council of Australia said.
“The MCA is aware of media reports from China that coal exports from Australia face further restrictions,” Minerals Council chief executive Tania Constable said.
“The success of this relationship has relied on a rules-based trade system, which has supported many years of economic growth and job creation, especially in Australia’s regions.
“The MCA encourages the Australian and Chinese governments to work together to resolve these issues and restore stability to the long-term trading relationship.”
The coal stand-off caps a rocky few days for Australia’s big commodity exports, with its two biggest iron ore producers, BHP and Rio Tinto, also called in for a dressing down by China’s steelmakers seeking an explanation over high prices.
The trade strike takes the total amount of Australian annual exports blocked by Chinese port authorities, crippled by tariffs or banned by customs to more than $20bn, following hits to wine, wood, barley, beef, lamb and lobster.
Australia’s trade with China has been knocked sideways by the ongoing ructions, which have decimated the amount of coal sent to the Asian nation.
Australian shipments of coal fell to just a fraction of normal trade in the first three weeks of November compared to up to 5m tonnes expected this month, sources said.
“The China ban has had a big impact on the trade. Typical volumes to China are between 6-10 million tonnes of thermal and metallurgical. We estimate that shipments were only 0.4m tonnes in November,” consultancy Wood Mackenzie said.
Still, China is paying a high price for its decision to abandon Australian coal with Queensland and NSW producers seeking alternative markets.
Coal from North America is now being sold into China at a huge mark-up to Australian supplies, marking the first time American coal has fetched a premium in the market.
“There are a few reasons but the most important is the coal shortage in China -- particularly for high calorific coal,” WoodMac analyst Rory Simington said.
“Chinese buyers are unable to get enough domestic high calorific coal, unable to get Australian material, so they are paying very high prices for this grade from other origins – Indonesia, Russia, and even South Africa, which they haven’t imported from since 2016 due to trace element issues. This has allowed Australian producers to place material into less traditional markets such as India, Bangladesh, and Turkey as well as increase competitiveness into traditional southeastern and north Asian markets.”
Australian producers have already been forced to send shipments to far-flung destinations in response to one of their biggest customers shunning supplies from Queensland and NSW mines.
Eight shipments of discounted coal were sold to Turkey in the last two weeks, sparking concern among miners that China’s ban had evaporated the premium attached to Australian supplies.
Shares in Australian coal miners were crunched on Tuesday, with Whitehaven falling 5.9 per cent to $1.52, while New Hope dropped 2.7 per cent to $1.42 and Coronado slid 10 per cent to $1.03.
