China-Australia relations: Beijing’s coking coal order another sign of thawing ties
Before the Lunar New Year, 80,000 tonnes of coking coal was ordered from the Moranbah North mine in Queensland to be shipped to China February/March.
China has not imported Australian coal since late 2020 amid conflict that deepened after Canberra called for an investigation into the origins of coronavirus.
Chinese buyers have booked another shipment of coal from Australia in a further sign that Beijing’s unofficial block on imports of the commodity from the resource powerhouse could be lifted amid a thawing of diplomatic tension.
This time, the import order was for coking coal, a key component of Chinese steel manufacturing and harder to replace compared to the thermal coal it also previously imported.
Just before the start of the Lunar New Year holiday, buyers ordered 80,000 tonnes of coking coal from Anglo-American’s Moranbah North mine in Queensland due to be loaded for shipment to China between late February and early March, according to commodity and energy price agency Argus Media.
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The identity of the buyer could not be determined as Chinese markets had been closed, but Argus Media said it sold at the cost-and-freight price of US$325 a tonne.
There were also orders for thermal coal earlier this year. Thermal coal is used for electricity generation.
But it is the physical arrival of these orders in China and the volume of trade after the first batch has arrived that will determine if trade relations have indeed thawed, Argus Media says.
“In recent days, we have heard of cargoes of thermal coal and coking coal loading from Australian ports and headed to China,” Argus Media told This Week in Asia.
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“The Moranbah North cargo is not the first coking coal trade destined for China that we have heard. It remains to be seen if the volumes from Australia to China for both kinds of coals will pick up after the initial cargoes arrive and how the restrictions are further eased.”
The latest order of 80,000 tonnes is a small shipment compared with the volume of coking coal China used to purchase from Australia monthly – roughly 2 to 3 million tonnes.
Other analysts said February would be a month to watch, which is when these orders should start arriving in Chinese ports.
China, the world’s largest coal producer and consumer of coal, has not imported Australian coal since late 2020 amid a diplomatic conflict that deepened after Canberra called for an independent investigation into the origins of the coronavirus in early 2020 without consulting Beijing.
But there have been signs of a thaw after a change in the Australian government last May, and Australian foreign minister Penny Wong’s Beijing visit in December to commemorate the 50th anniversary of the establishment of the two countries’ diplomatic relationship.
Wong’s trip marked the first ministerial visit between the two countries since 2019.
Chinese steel mills should welcome the easing of restrictions on Australian coal imports due to the importance of Australia’s high-quality coking coal in its furnaces. Industry observers have said China could shift away from Australian thermal coal but it would have a harder time finding a replacement for Australian coking coal.
Commodity markets analyst Navigate Commodities managing director Atilla Widnell said coke batteries and ovens at steel mills deteriorate over time without the use of premium coking coals.
“The latest trade paves the way for the normalisation of trade across commodities,” Widnell said.
“China will need sufficient high-grade coking coals and steel to feed its economic growth plans for 2023, and that’s paramount; that has been made abundantly clear by senior Chinese officials and government agencies,” he said.
China reopened its border at the start of January, ending its zero-Covid policy after three years.