The coal shortage in China is unlikely to force Beijing to lift the ban on Australian imports anytime soon despite the pressing need to boost energy supplies amid a national power crunch, experts believe.
Earlier this month, Beijing reportedly released insignificant quantities of Australian coal that were stuck at Chinese ports as a result of a nearly year-long unofficial import ban on the fuel.
“Reports that small quantities of Australian coal were allowed to clear customs in China have increased speculation that Chinese authorities will look to relax the import ban on Australian coal,” Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank of Australia, said as quoted by CNBC.
However, the expert thinks Chinese authorities will not relax the ban on Australian coal this winter.
Last year, China stopped purchasing coal from Australian producers due to trade tensions triggered by Canberra’s support for a US-sponsored international inquiry into China’s role in the Covid-19 outbreak. Previously, Australia was a major coal supplier to China, accounting for nearly 38% of Chinese thermal coal imports. Beijing’s trade restrictions also extend to other Australian exports, such as wine and barley.
There are no signs that China will allow companies to purchase new shipments of Australian coal, Rory Simington, principal analyst at Wood Mackenzie, told the media.
“This is largely a political issue and not an economic one, and, yeah, no signs of any easing on the ban on new cargoes,” he said, stressing that the political situation hasn’t improved.
The Chinese economy relies heavily on coal for power generation. The country’s officials reportedly urged state-owned energy majors to secure supplies for the upcoming winter season at all costs to ease the power crunch.
At least 20 Chinese provinces have reported power cuts of varying extents since August. An increasing shortage of coal supplies is one of the key reasons for the blackouts, along with tougher government directives to slash emissions and higher manufacturing demand as the global economy reopens after the pandemic.
China could easily look to other countries, such as Indonesia, Mongolia, Russia, the US or Colombia for more coal, analysts say.
“China is likely to push Indonesian suppliers for more coal but they are nearly at peak capacity,” said Abhinav Gupta, a dry cargo research analyst at shipbroking firm Braemar ACM.
Between January and August, Indonesia reportedly accounted for about 57% of China’s thermal coal imports, while volumes of supply from Russia were also growing.