China Supply Glut Puts Australian Coal on the Firing Line
(AFR) — Australian coal will be hardest hit as China cuts imports of its key energy source to tackle oversupply, and implements policies favoring domestic suppliers and cleaner alternatives.
That’s the warning from industry officials, traders and miners, who told a major coal conference in Shanghai on Tuesday that China’s cuts to Australian coal imports would be greater than from other suppliers such as Indonesia and Russia, confirming the fears that existing restrictions and delays would drag on.
While officials denied import restrictions were politically motivated, Chinese coal traders said privately Australian exports was being targeted. One trader said Australian coal was now banned at all ports in China, but two others said the situation was unclear and coal was still getting through.
The grim outlook at the Coaltrans China conference was the latest blow for the embattled coal industry, under pressure from the environmental lobby and restrictions on imports imposed by Beijing since January. Coal is shaping up as a key federal election issue in Australia, with the proposed Adani coal mine in Queensland splitting Coalition MPS.
Li Wei, managing director of Chinese state-owned enterprise Yankuang Group — which controls Yancoal of Australia — said businesspeople and politicians from both countries must work more closely together to improve the diplomatic relationship. “We should have more communication between the public, businesspeople and politicians from the two countries,” Li told The Australian Financial Review on the sidelines of the conference in a rare interview. “Australia should [learn to put] itself into someone else’s shoes.”
However, he said he was not concerned about demand from China, saying Australia exported high-quality coal and Yancoal also exported to Japan and South Korea. Asked if opposition to the Adani mine and Labor’s environmental policies would make it harder for Chinese companies to invest in Australia, he said: “There are always risks in overseas operations.”
Traders, analysts and officials told the conference that China faced an oversupply of coal which would hurt imports. Australia accounted for 29% of China’s coal imports last year, second to Indonesia at 45%, the conference was told.
They also said China could agree to source more of its energy supply, including coal, from the United States as part of a trade deal with Washington.
Rodrigo Echeverri, head of research at Noble Resources, said the coal industry faced a “big, big problem” because gas was cheap and there was a glut of supply in the Chinese thermal coal market. He said China’s coal inventories were at their highest levels since 2015.
Echeverri said the expected fall in China imports would mostly hurt Australian mid-CV (calorific value) coal by 15 million tons, while Indonesian coal demand would remain strong.
“I’m being nice; this was before the meetings last night,” he said of the forecasts made before he spoke to industry players in Shanghai the previous evening. “Now I’m feeling a bit more negative.”
“There could be some more American coal in the Chinese market. I’m quite convinced of that,” he said. “The problem is high CV from Australia is really not going to find a home in China. It is going to have to go somewhere else.”
Many observers at the conference said there was a political component to Chinese demand, although it was not something officials would talk openly about. “If China reaches an agreement with the U.S. there has to be a drop in Australian exports … it has to be Australian right?” said Chris Atkinson, the manager of market analysis at Anglo American, said.
The Australian dollar and mining stocks fell sharply earlier this year following reports than ports in Northeast China had banned Australian coal. The Chinese and Australian government denied the report, but confirmed shipments were being held up by up to 45 days.
The move to ramp up environmental checks on Australian coal is worrying the Australian government and mining industry, although it is not believed they are aware of an outright ban. China will not confirm any move that is seen to favor domestic coal, and traders say the issue is too politically sensitive to talk about on the record.
Wang Hongqiao, vice president of the China National Coal Association, said there would always be demand from China for coal, but it currently faced an oversupply. “We will have a slight surplus of capacity,” he said, adding that China would produce an additional 100 million tons of coal this year.
China has approved 12 new coal mining projects this year as it focuses on higher-quality and more efficient mines after closing down thousands of inefficient operations.
Wang later said that restrictions on Australian coal were not politically motivated and based on supply and demand. “We don’t have any prejudice on Australian coal, he told the AFR. “This regular activity and environmental checks on Australian coal is a market decision.”
Thermal coal exporter New Hope Corp said last month revenue from exports to China fell sharply over the six months to Jan. 31, sending its shares down. The company has, however, been able to make up the shortfall by selling to other markets in Asia.
Many analysts believe there is a permanent shift taking place in how China sources coal, which has long-term implications for Australian miners and the nation’s economy. But others say it is the temporary result of the amalgamation of small Chinese coal mines, which means coal is being cleared cheaply at a time when demand has slowed.
This story was originally published in The Australian Financial Review.
Sep 13 05:16
Sep 12 18:51
Sep 12 17:15
Sep 12 15:50
Sep 12 13:15
Sep 12 13:33
Sep 12 13:55
Sep 12 12:18
Sep 12 11:20
Sep 12 04:02
Sep 12 04:09
Sep 12 04:21
Sep 12 04:59
- 1Power To The People: Pintec Serves A Booming Consumer Class
- 2Largest hotel group in Europe accepts UnionPay
- 3UnionPay mobile QuickPass debuts in Hong Kong
- 4UnionPay International launches premium catering privilege U Dining Collection
- 5UnionPay International’s U Plan has covered over 1600 stores overseas