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China predicted to lock out Aussie coal for years

Coal mining QRC
Coal mining

An Asian superpower is not expected to ease import restrictions on Australian coal anytime in the next 24 months.

Global investment bank Goldman Sachs believes the Chinese Communist Party (CCP) will continue to force Mainland Chinese companies to buy coal products from any country other than Australia for many years to come.

‘Last for years’

“The base case for most companies now is that the China import ban on Australian coal may last for years,” Goldman Sachs mining analyst Paul Young told News Limited.

QMEB understands Chinese customers have already ordered coal from different exporters based in the United States, Russia, Indonesia or South Africa. This trend could continue for the unforeseeable future, unless diplomatic tensions ease between Canberra and Beijing.

Tensions ‘worsen’

Mining research group Wood Mackenzie expects Mainland China will eventually need more stock, after stranding more than 70 vessels carrying coal worth over $1 billion for months before finally turning them away at the beginning of 2021.

“China is short [on] coal … [and] political tensions between China and Australia have worsened since an informal ban on Australian coal was implemented in October last year,” Wood Mackenzie principal analyst Rory Simington said in a new report.

“It now appears the ban could remain in place for much longer than anticipated.”

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Consulting firm Verisk Maplecroft suggests Australian mining companies should start finding new customers and diversifying away from China. QMEB understands the most attractive coal-export destinations include India, Pakistan and the Middle East.

“Deteriorating bilateral relations will likely drive Beijing to diversify supply away from Australia, especially of resource commodities it sources primarily from the latter,” principal analyst Kaho Yu said in a public statement.

“The two countries are locked in a cycle of tit-for-tat policy action against each other. While Beijing will likely continue to impose administrative restrictions on imports from Australia, Canberra will also likely tighten restrictions on Chinese investment, especially in sensitive sectors.”

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