Chinese Policy On Coal Imports Could Hit Australian Thermal Coal Exports

The revenues that Australia earns form export of coal could suddenly drastically go down if China decides to use more of domestic coal and if competing exports are favoured by continued port restrictions, said reports published in the Australian media quoting warning from a federal government report of the country.

The report by the industry department said that the energy and resources exports of Australia will add another $20bn to come to $278bn this financial year.

However there is an imminent threat for the country’s coal exporting industry to China worth $5bn, the report, released on Friday, also warned.

the manner in which the Chinese government had restructured its domestic coal sector in the last decade or so was detailed in the report, which would seriously hamper the export revenue of Australia even as there are increasing concerns about Chinese ports imposing delays on Australian coal shipments.

The report also said that following the construction of rail freight lines to hard-to-reach coalfields hundreds of kilometres inland, China now has direct access to about 200m tonnes of thermal capacity coal. Connectivity to gain direct access to another 400m tonnes of capacity is being constructed.

Last year, Australia exported 208m tonnes of thermal coal worth $26bn which makes it the second largest exporter of the mineral in the world. exports to China accounted for about 20 per cent of that number.

According to the report, even though it was possible for Australian thermal coal to find new markets such as India, there would always be a downward pressure on price.

“If there is a prolonged decline in Chinese imports of Australian coal, some of the impacts on Australian producers could be lessened by a redirection of trade flows, but prices for Australian coal could also come under pressure,” it said.

“The scale of China’s coal demand relative to the size of global coal markets, coupled with ongoing policy uncertainty, makes developments in China a key risk to the outlook for coal prices and Australian coal exports.”

Increase of supply of commodities from competing countries, a weaker US dollar and a cyclical slowdown in world demand could bring down commodity prices in 2019-20 which would be opposite to what Australia has enjoyed in the past few years with a huge boom in resource and energy export earnings.

The report said that there would be a continuous fall of export earnings for the country for a period of four years.

Australia is also the largest exporter in the world of the steel making mineral iron ore and it is also the largest exported product of the country in terms of value. Last year, the country exported 836m tonnes of iron ore.

The report also predicted that there would be an increase of 21 per cent in iron ore export earnings in 2018-19 which would be the second highest amount on record.

“The living standards of Australians rely in large part on maintaining a strong resources sector,” said minister for Resources and Northern Australia, Matt Canavan. “Even if you don’t work in resources, the revenue that the industry brings in helps pay for schools, hospitals and other services.”

(Adapted from TheGuardian.com)

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Categories: Economy & Finance, Geopolitics, Strategy, Sustainability, Uncategorized

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