China coal buyers may be left wanting in Australia even after ban removal

MELBOURNE: China is preparing to resume coal imports from Australia after a two year freeze as it looks to stave off a domestic shortage, but it may be forced to pay higher prices given that Australia’s miners have already found new customers.

China’s state planner has allowed three central government-backed utilities and its top steelmaker to resume coal imports from Australia for the first time since Beijing imposed an unofficial ban on coal trade with Canberra in 2020, Reuters reported on Wednesday. Australia was China’s second-largest coal supplier before the ban, which followed a souring of diplomatic relations.

The ban eventually expanded to wine and foodstuffs worth billions of dollars.

The coal ban’s end follows a thawing of relations after a change in Australia’s government, highlighted by a meeting between the countries’ foreign ministers in Beijing last month and messages between their two leaders.

But in the meantime, Australia sold more coal to existing customers and found new ones, as the war in Ukraine left European power producers seeking to replace Russian coal. “Most of the Australian coal producers’ order books are pretty much chock-a-block full. The problem Chinese buyers have had is that they have left this so long, miners have found happy customers elsewhere,” said analyst David Lennox of fund manager Fat Prophets in Sydney. “China is just going to have to pay up for it. If you play these games eventually they do come back to bite you somewhere and that is exactly what is happening,” he said. Australia’s ties with its top trade partner soured in 2018 when it became the first to ban China’s Huawei from its 5G network, and worsened after Canberra called for an enquiry into the origins of the coronavirus in 2020.