Australian coal miners could be forced to sell “distressed” cargoes at a discount as China looks to restrict imports of both thermal and coking coal, according to consulting major Wood Mackenzie, as shares in Australian miners tumbled on the prospect of fresh import bans.
China’s reported crackdown on Australian coal comes amid ongoing trade tensions between Canberra and Beijing, and follows Chinese authorities slapping tariffs on Australian barley earlier this year.
Shares in Australian coal exporters took a significant hit on Tuesday, with Coronado Global Resources, New Hope Corp and Stanmore Coal all down more than 6 per cent.
WoodMac analyst Rory Simington said the latest round of restrictions were likely to hit Australian coking coal — which is used in steelmaking — as well as energy coal exporters.
“We understand that the previous bans on utility purchases of Australian coal have been extended to steel mills and the bans for utilities reaffirmed. As of yesterday, almost all major steel mills had been informed of the ban on Australia coal, including coal waiting to offload and sitting on port stockpiles,” he said.
Mr Simington said the latest instructions to coal buyers appeared be to part of China’s attempts to restrict overall coal imports to 2017 levels of about 270 million tonnes, including both coking and energy coal. He said they would affect global prices as Australian producers looked for new buyers for their shipments.
“While coking coal prices have not really been impacted to date we expect there will be significant short-term weakness due to distressed cargoes that will be redirected to other markets.
“For thermal coal, high ash prices are down $US5/tonne since mid-last week and are likely to be pushed back to the distressed levels we saw in the third quarter.
“Benchmark quality thermal coal prices will also inevitably be impacted,” Mr Simington said.
Read the full article published in the Australian Business Review, 14th October 2020