Chinese Unofficial Ban on Australia Changes Coking Coal Dynamics
Reuters reported that Chinese steel mill are paying a high price for its unofficial ban on coal imports from Australia, with the cost of domestic and alternative
Reuters reported that Chinese steel mill are paying a high price for its unofficial ban on coal imports from Australia, with the cost of domestic and alternative foreign supplies rising for both thermal and coking grades of the fuel. However, China's consumers of imported coal have been facing higher costs, with prices for alternatives to supplies from Australia, both local and foreign, rising as the market adjusts to the unofficial ban. If a Chinese importer switched from Australian cargoes to those from the United States, the price difference has entirely reversed since the ban started to affect flows.
In coking coal, the price of free-on-board Australian cargoes has been weakening since the ban was imposed, apart from the usual seasonal gain for the northern hemisphere winter. The Singapore Exchange contract for Australian coking coal ended at USD 113 a tonne last week, down 19% from the USD 140 that it reached at the start of October, just as the Chinese ban was coming into effect. On the other hand, coking coal free-on-board at the US east coast port of Hampton Roads, as assessed by commodity price reporting agency Argus, has surged to USD 153 last week from USD 114 a tonne at the start of October last year, a gain of 34%. China's domestic coking coal price has also been gaining since the restrictions on imports from Australia, with Dalian Commodity Exchange futures rising 16% from CNY 1,353 a tonne at the start of October to end at CNY 1,573 last week
China, the world's biggest importer, producer and consumer of coal, has effectively ended imports from Australia, the biggest shipper of coking coal and number two in thermal coal used to produce electricity, as part of an ongoing political dispute between the two nations. The restrictions on imports from Australia came into effect in the second half of last year, resulting in China's imports dropping to virtually zero in the first two months of this year from a 2020 high of 9.46 million tonnes in June.