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Aussie coal buyers ordered to find product elsewhere

Glencore coal

Australian coal producers will have to find new export markets after Chinese authorities ruled out buying the commodity from Down Under.

The Chinese Communist Party (CCP) recently informed 73 cargo ships waiting off the shore of Mainland China that they will not be allowed to unload nearly 8 million tonnes of Australian coal.

‘No chance’

Anastasia navigation officer Gaurav Singh expressed deep disappointment with China Customs’ repeated delays that stranded him and 1500 other sailors in both the Yellow and East China seas for about six months.

“There is no chance Australian cargo will be offloaded in China. We do not have any hope,” he told News Limited.

Fire sale

Meanwhile, ITOCHU Corporation is considering to completely sell off its 15 per cent stake in Whitehaven Coal’s Maules Creek Coal Mine in New South Wales’ Narrabri Shire as well as other coal operations across the nation.

“[We are] promoting decarbonisation by fully divesting from thermal coal mining assets,” the company said in its medium-term management plan for 2022-2024.

Whitehaven Coal is still holding talks with its Japan-headquartered investor, and believes the Chinese ban will dramatically steer the Australian coal industry towards the South Asian and Middle Eastern markets that could theoretically resell to Mainland China.

“China’s restrictions have altered seaborne coal trade flows where, instead of being delivered to China, Australian coal is now finding customers in alternate destinations including India, Pakistan and the Middle East, and traded coal historically delivered into these markets is finding its way into China,” the company said in its December 2020 quarterly production report.

Russia, Indonesia and South Africa wins

The coal producer confirmed speculation that the CCP was choosing to import more expensive coal from other trading partners instead.

“China has supplemented its domestic coal production with higher cost coal from alternative origins such as Russia, Indonesia and South Africa,” Whitehaven said. “In addition, late in 2020 China lifted its total import quota in response to strong domestic demand and an extremely cold winter.”

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Although the CCP’s ban will temporarily mean lower Australian coal spot prices, Whitehaven is largely unaffected by the political standoff and expects sales volumes to return to pre-pandemic levels before the end of 2021.

“Prices for Australian origin metallurgical coal remain weak in the absence of Chinese buyers,” the company said.

“Asian steelmaking output exChina continues to improve as economic stimulus activity drives increased coal demand and consumption in Whitehaven’s key metallurgical coal markets of India, Japan, Korea, Vietnam and Taiwan … Whitehaven expects sales volumes in 2021 to return to pre-COVID-19 levels.”

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