Sxcoal Issue #5 | China's potential lift of 2Yr+ Australian coal import ban

China is most likely to lift a two-year-plus ban on the import of Australian coal. What potential impact this could have for the seaborne coal market?

Multiple sources have reported China could partially end the unofficial import ban on Austrlian coal, though no official authorities have publicly confirmed so.

Industry insiders and trade sources also indicated its high likeliness to Sxcoal, but all have to wait for further signs of development or potential confirmation from relevant authorities.

Some background

China introduced an unofficial ban on Australian coal as well as some other commodities in October 2020, in response to a series of unfriendly moves by the Morris administration.

As Albanese stepped up as the new prime minister, especially after Australian foreign minister Penny Wong's visit to Beijing in December 2022, the tension began to ease and finally prompted the possible lift.

Potential impact

Should the expected lift of import ban go forward, even if partially, we may see the impact vary among different grades of coal exported from Australia.

Thermal coal Over the past two years, China has strengthened thermal coal imports from Indonesia and Russia, while Australia ramped exports to other markets to make up for the loss in the Chinese market.

Chinese utilities, major end users of thermal coal, have been in a steady supply mechanism with domestic miners through medium- and long-term contracts. The government has planned to add 300 Mt more into the contracts this year.

So, the re-opening to Australian coal, especially those of high-CV, will bring more price discoveries, either into China or internationally. But Australian coal presently is not competitive enough compared with Chinese domestic coal, nor imposes direct challenge to China’s top supplier Indonesia, which mainly exports low-CV coals.

Coking coal There will be a major supply swing in coking coal if Australian coal is allowed to re-enter China. Australian premium low-vol (PLV) hard coking coal used to be highly sought after in China, especially to blend with local high-ash, high-sulfur coals, as well as other blending coals imported from Russia and Mongolia.

Chinese steelmakers and coking plants will thus benefit from inflows of Australian coal, which could help ease their high cost pressure seen in the past years.

Good demand for Australian PLV, however, may not have much impact on the ample supply of Mongolian and Russian coals, which should continue to flow into China at stable or higher quantities.

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