Australian coking coal too pricey for China even as curbs end

China's demand for Australian coking coal for steelmaking remains lacklustre even after Beijing removed import restrictions, as supplies from local mines, Mongolia and Russia are cheaper, traders say.
 
Beijing in early January partially eased an unofficial ban on Australian coal imports by allowing three state-backed utilities and a steelmaker to resume procurement as the two countries sought to rebuild ties.
 
The restrictions were further eased last month after China’s commerce ministry said coal trade is a "normal activity".
 
Several key coal import regions, such as Guangdong, Fujian and Guangxi, have fully lifted the curbs, according to three people who deal in Australian coal, adding that customs authorities have granted permission to clear all cargoes.
 
However, the policy change has not spurred much buying by Chinese coking coal traders as there is barely any profit to be made due to high Australian coking coal prices.
 
Before the restrictions were imposed in late 2020, China bought more than 30 million tonnes of coking coal annually from Australia, about 40% of its imports.
 
"We won’t see Australian coal starting to flow until we see that arbitrage window open again," said Lloyd Hain, managing director of mining research firm AME Group in Sydney.
 
"The only way China prices are going up is if we see a surge in steel production, and that doesn’t look like it’s going to happen in the next month or so." 

Premium Australian hard coking coal (HCC) was priced at around $360 a tonne on a free-on-board (FOB) basis last Friday, equivalent to about 2,650 yuan ($385) a tonne delivered to north China after adding freight and other fees, traders said.
 
Importers would face losses of about $65 per tonne, as similar quality domestic supply is trading at about 2,200 yuan a tonne, according to Reuters' calculation based on market prices.
 
Mongolian and Russian coking coal priced at about 2,030 yuan a tonne at China-Mongolian border and 2,240 yuan a tonne at northern Chinese ports, respectively, are also more competitive than Australian supplies, the traders said.
 
Analysts and traders expected limited impact from the resumption of Australian coal imports in China as Australia’s market share has largely been taken over by Mongolia and Russia in the past two years.
 
In 2022, China’s imports of Russian coking coal doubled from 2021 and arrivals from Mongolia surged 82% year-on-year, Chinese customs data showed.
 
Only one Australian coking coal cargo, bought by China Baowu Group, has reached China since the import restrictions were lifted in January, according to traders and shiptracking data from Refinitiv and Kpler.
 
About three shipments are scheduled to arrive this month versus more than 30 Australian thermal coal cargoes, the data showed.
 
Australian coking coal cargoes en-route to China could be resold if Chinese domestic prices fall further, traders said.
 
Source: Reuters

The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.