China’s embargo on Australian coal causes inferior grade Mongolian imports to surge

Mongolian Coal Mine

Mongolian Coal Mine

Green revolution anyone? Despite China’s aggressive geopolitical games, queues are forming at Australian coal export ports as other countries awaken from their Covid-19 economic slumber.

Beijing’s ban on Australian coal has resulted in increasing imports from Mongolia, meaning the country could retake its position as China’s top supplier.

But Chinese users could bear brunt of the Australian ban due to higher costs for alternatives, transport difficulties and a drop in quality.

Chinese steel mills and power stations have started buying more coal from Mongolia after Beijing imposed a ban on imports from Australia, but price, quality and logistical difficulties mean it will not be easy for some users to make the switch.

While politics might have played a role in the decision to shut off Australian coking and thermal coal, the practical difficulties in doing without it may force a rethink of the ban over time, analysts said.

Coal from Mongolia, which borders China to the north, is the most obvious replacement for Australian coal, particularly due to the inability of suppliers located further away – such as the United States, Russia and Canada – to meet a short-term increase in demand, S&P Global Platts said in a recent update.

But while users in northern China will largely be able to make the change, those in southern China will find it more difficult to do so because of the logistical difficulty and expense of transporting coal from Mongolia. This is likely to force many to rely on more expensive domestic coal if they can no longer access Australian imports.

So far the ban does not appear to have impacted Australia, with reports of queues forming at Australian coal export ports.

Australian coal shipments are holding up in October despite Chinese restrictions on imports and wild weather that has buffeted the east coast of Australia over the past four days.

Queensland coal shipments are tracking in line with September and those from New South Wales (NSW) are ahead of September, according to initial shipping data compiled by Argus. Shipments are being bolstered by increased demand from economies outside of China that are reopening following Covid-19 lockdowns. 

Shipments with confirmed destinations in China fell significantly in September and have remained depressed in October, but all the main ports show over 1mn t of shipments to unconfirmed destinations in both months. This is an increase from previous months and could be shipments that will make their way to China eventually or shipments that will be resold because they cannot get into China, following Beijing’s instructions that key steel producers and power utilities stop importing Australian coal.

I can understand other countries taking up some of the slack, but doesn’t it seem odd that the Chinese import embargo has barely had an impact? Perhaps some Chinese regional leaders are quietly ignoring the import ban.

Source: Watts Up With That – China’s Embargo on Aussie Coal Causes Inferior Grade Mongolian Imports to Surge

Categories: Mining & Energy

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