Australia plays down reports of Chinese coal ban

Posted February 25, 2019

"It's an administrative process if you have to deal with extra paperwork with regard to imports, and sometimes an added cost as well", the source said.

Overseas coal supplies into China, especially from Australia, have slowed for weeks, causing shipping backlogs outside key Chinese ports. The benchmark 10-year US Treasury yield fell sharply to an 11-day low on Tuesday ahead of the Fed meeting minutes, which are due later on Wednesday, further dampening demand for the dollar.

Beijing has been trying to restrict imports of coal more generally to support domestic prices.

A Chinese media steel industry website says that China will obtain most of its coal imports in 2019 from Russian Federation and Indonesia, reports Sydney Morning Herald. According to a representative of the Dalian Port Group, the operator of the port of Dalian, overall coal imports have now been capped at 12 million tons for the year.

Australian officials said there was "confusion" over the situation, and they were consulting their Chinese counterparts.

Harcourt says: "China needs Australia to provide rocks and crops to make sure it can transition from being a nation of shippers to a nation of shoppers to raise domestic consumption and investment and not just be export-dependent and low cost". "Our ambassador will be making inquiries", Frydenberg said.

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However, concerns persist over the lack of liquidity in the spot market and therefore its transparency, though the emergence of trading platforms such as Global Coal in recent years have improved things.

"China's customs assesses the safety and quality of imported coal, analyses possible risks, and conducts corresponding examination and inspection compliant with laws and regulations", he said.

"So, yes, we can see these occasional interruptions to the smooth flow but that doesn't necessarily translate to some of the consequences that aspects of the media might seek to leap to". He said Beijing was applying its rules equally to all countries and wasn't discriminating against Australia.

"The immediate step was to find out from China what is happening. We have to wait to see what the underlying reasons are", he said at a parliamentary hearing in Sydney. The country also expressed its dismay and mentioned that it is hoping China would honor its standing free trade agreement.

Mr Mackenzie told an analyst and investor briefing earlier this week that all suppliers had been hit by delays at Chinese ports.

"One way they can control production is control the amount of imports, and coke and coal is an important input for steel production".

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On implications on metallurgical coal, Wood Mackenzie's research director Robin Griffin said a prolonged China-wide ban could have enormous implications for markets in both countries.

The Australian dollar was up 0.1 per cent at US$0.7169 and in reach of a two-week peak of US$0.7183 brushed on Wednesday.

The Dalian ports handled ~14M metric tons of coal previous year, half from Australia, says Gu Meng, an analyst at Orient Futures.

However, currency markets are likely to remain on edge for some time.

The consequences of China's ban on Australian coal imports are already being felt across the industry despite the thin details released.

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