China’s coal ban hits Queensland budget

China’s ban on Australian coal has hit Queensland’s bottom line, nearly halving royalty earnings.

Beijing’s trade sanctions slashed imports of coking coal used to make steel from 20 million tonnes in the period October 2019 to April 2020, to just 2.5m tonnes for the same time this financial year.

China’s ban on Australian coal has hit the bottom line of the Queensland budget, nearly halving royalty earnings that were also slammed by the pandemic.

Beijing’s trade sanctions slashed imports of coking coal used to make steel from 20 million tonnes in the period October 2019 to April 2020, to just 2.5m tonnes for the same time this financial year.

Shipments of thermal coal to fire power stations in China fell from 8.6m tonnes to 330,000 tonnes, the budget papers showed.

Overall, contraction in global demand for coal from Covid-induced downturns reduced Queensland coal exports by 17.9 m tonnes in the first ten months of 2020-21.

Coal royalty earnings plunged from $3.5bn in 2019-20 to an estimated $1.7bn this financial year.

“The fall in coal prices and volumes reflects weaker global economic growth, which was exacerbated significantly by the Covid-19 pandemic,” the budget papers said.

“Import restrictions from China have also weighed on Australian seaborne coking coal prices, while the impact on volumes will depend on how long the restrictions remain in place and how much supply will be taken up by other countries.”

Encouragingly, coal royalties are forecast to rebound from July, growing 17.4 per cent in 2021-22 on the back of rising hard coking coal prices.

“We would like to see improvements there, because it affects Queensland jobs,” Premier Annastacia Palaszczuk said. “What we are seeing is some increase in demand from some of our other trading partners, for example Japan and South Korea … but of course it does impact on us, yes.”

Total mineral royalties including those from coal seam gas production and land rents fell $2bn from $4.6bn in 2019-20 to $2.6bn for 2020-21. This recovers across the budget forward estimates to a projected $4.2bn in 2024-25.