Australia not the only country under Chinese blockade

2020   |   November - December   |  034

According to China’s General Administration of Customs, the country’s coking coal and thermal coal imports hit 264 million tons, down 10.8 percent year on year. That is a cut by 32 million tons in its overseas coal imports in the past 11 months since the pandemic hit globally.

Specifically, Mongolia’s southern neighbor’s coal imports fell by 43 percent year on year by November, according to the Energy Report by the country’s National Bureau of Statistics. China’s thermal coal import dropped from July, falling 20 percent by monthly volume to 25 million tons. That coincides with the stark decline in export from Australia, the main supplier of this type of coal. It became evident to not only Australia but other suppliers as well, that China had imposed a ban on its coal imports. However, this ban started far back in July, as evidenced by the two countries’ trade statistics. 

Australian coal export towards China reached 12 million tons by last June, its peak in 2020 before dropping rapidly from July. Last time, in November last year, Australian coal supply to China was a meager 0.2 million tons.

While Australia is bound by the ban and Mongolia and Indonesia’s supplies slumped, Russia’s coal supply to China increased. 

The Australian Bureau of Statistics reported that 20 percent of the 1.2 billion USD decline in total exports to China by monthly value constituted by coal decline. Of this, thermal coal export to China fell by 68 percent and coking coal by 70 percent, both in volumes, creating 258 million USD in revenue cut. In addition to China, South Korea’s thermal coal procurement slumped in November by 101 million USD, noted the Australian Bureau of Statistics. 

Despite a reduction in purchasing by major buyers, including China and South Korea, Australia has managed to increase its coal exports towards other countries. In particular, semi-coking coal sales to India went up by 77 percent (90 million USD) by volume in November, whereas coking coal supplied to the Netherlands increased by 70 percent.

Although China curbed its purchasing, Australia will increase its exports to Vietnam and the Philippines while maintaining its position on other key markets, including Japan, India, South Korea, and Taiwan, said Simon Birmingham, Minister for Australia’s Trade, Tourism, and Investment.

As Australia, the key player in China’s coal market, is left outside of the race, other expectant like Mongolia and Indonesia couldn’t increase their supplies by capitalizing on this opportunity. As ranking third in coking coal supplies to China, Mongolia’s export of 28.5 million tons of coal to China at the end of 2020 is a 20 percent fall compared to 2019. By December, 2 million tons of coal were exported which is twice as less month on month.    

After signing an agreement with China to supply thermal coal worth 1.5 billion USD, Indonesia’s export reached 93 million tons in the first ten months of last year. By October, this went down by 1.3 million tons to 5.7 million tons.  

While Australia is bound by the ban and Mongolia and Indonesia’s supplies slumped, Russia’s coal supply to China increased. Compared to its 33 million tons of coal exported to China in 2019, Russia has supplied 35 million tons in 2020 as preliminary. Mongolia’s northern neighbor increased its overall coal export in 2020 towards not only China but to other countries as well. According to the website on coal markets, Russia’s coal export grew by 1.5 percent to 193 million tons last year compared to 2019. 

Meanwhile, another trend observed in our southern neighbor who cut back on coal imports overseas is the growth in domestic coal production. According to the National Bureau of Statistics of the PRC, the country’s raw coal production went up 1.5 percent to 350 million tons in November alone. Total annual production reached 3.5 billion tons, showing a 0.4 percent increase as well. 

China is thus curtailing its imports and supporting its domestic mines instead. Raw coal production at the Ordos, China’s largest coal hub, exceeded 60 million tons in November for the first time since the beginning of 2020, growing by 8.7 percent overall by monthly volumes, reported the regional statistics bureau. 

Furthermore, China’s commissioning a bulk of new coal deposits and mines. Inner Mongolia, one of the three largest coal-producing regions of China, has commissioned 26 new mines since last October. Combined, they have the capacity to supply 100 million tons of coal. At the turn of 2021, the Xingjiang region, bordering our country in the southwest, has been awarded permits to six coal mines by relevant authorities. The total annual capacity of these mines is reportedly 15.3 million tons. 

After imposing a ban on Australian coal, China’s steadily continuing its policy to rapidly commission its new mines, increase domestic outputs and encourage its national enterprises. In addition to increasing imports from countries such as Russia, Indonesia, and Mongolia, it also went on the hunt for new suppliers to fill the gap left by Australian coal supplies. According to reports by the Chinese National Development and Reform Commission, China is considering a purchase of American and Canadian coals. Although these are logistically more expensive options, the deals are able to go through in a short period once parties agree on a negotiation. Moreover, Chinese officials are considering the possibility to expand trade with South Africa to replace high-grade Australian coal. 



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