More Australian coal due to arrive in March as Chinese firms restore confidence amid eased trade ties

Australian coal exports to China have resumed gradually as domestic steel companies diversify sources of supply while gradually restoring confidence in Australian goods amid eased bilateral trade relations, industry insiders said.

Customs clearance and other import procedures are taking place in an orderly manner after the first batch of Australian coking coal arrived at a port in South China's Zhanjiang on February 8, an industry insider told the Global Times on Friday on condition of anonymity. More Australian coal is expected to come later.

"This is part of the 500,000 tons of Australian coking coal to China, which is coming in several batches," the insider said, noting that there will be three or four ships uploading coal at Australian ports and which are due to arrive in February and March.

"All these goods will be sent to China Baowu Steel Group Co (Baowu), China's largest steel company," she said.

The trade resumption came as Chinese steel industry players restore confidence in the Australian commodity after more than two years of reductions and halts amid deteriorated relations and other factors.

Australia previously ranked second in terms of global coal supplies to China, making up around 30 percent of China's total coal imports, after Indonesia, according to media reports.

However, as companies sought other more reliable sources of supplies to reduce the potential risks of disruption amid soured relations, Australian coal lost favor and dropped out of the top five. Now, Indonesia, Russia, Mongolia, Canada and the US account for around 96 percent of China's overall coal imports, industry reports said.

The coal trade is gradually getting back on track amid high-level interactions, sending out a clear message of stability and momentum in trade growth in major goods such as coal.

Chinese steel companies including Baowu are among the first to have resumed the corresponding trade with Australia, while others are taking a wait-and-see approach, experts said.

At the current stage, coal trade with Australia is mainly conducted point-to-point, which means that the goods are preordered or scheduled by certain steel companies in advance and directly delivered from port to plant, with no circulation in the market, industry insiders said.

However, amid the momentum gathering in trade, Reuters reported on Thursday that at least one ship carrying Australian coal that was destined for China has been diverted, claiming that the coal imports from Australia were "not going smoothly."

While there is a wide expectation for trade relations to recover soon, industry experts said it takes time given multiple factors such as market and business confidence and acceptance. Other factors, such as market demand, also played a part in the trade.

There is a wide range of suppliers for the Chinese market available these days, not to mention the growing rate of home production, as the nation puts more emphasis on securing energy supplies and not overly relies on any singular source.

As Australian coal imports resume, some downstream manufacturers and traders are expecting a price cut for coking coal, but they have a strong wait-and-see mentality and are relatively cautious about procurement at the moment, according to media reports.

China is a prime market for Australian goods such as coal, iron ore and wine. However, many of these goods lost ground in the Chinese market as domestic companies sought alternatives to reduce the risks from disruption amid cooled relations.

Source: Global Times

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