By Kevin Morrison

February 5, 2021 - Australian exports of thermal and coking coal to China may remain weak for the foreseeable future, according to Australia's central bank, because of Beijing's import restrictions as trade relations between the two countries deteriorated last year. The next move from either country on the issue will have a significant impact on coal trade flows, said the Reserve Bank of Australian (RBA).

Australian domestic coal production had been cut back in response to lower prices since the onset of the Covid-19 pandemic, the RBA said in its quarterly statement on monetary policy.

Thermal coal prices have since recovered because a cold northern hemisphere winter has increased demand for thermal coal, while Indian steel production has recovered to pre-pandemic levels and helped underpin metallurgical coal exports, the RBA said.

"But coal exports to China have fallen in recent months and could remain weak for some time because of ongoing uncertainty surrounding Chinese coal import policies and the bilateral trading relationship. Any increase in coal exports will likely involve diverting these exports elsewhere," the RBA said.

Australian thermal coal exports to China in 2020 dropped by 30pc from the previous year to a five-year low of 34.85mn t, according to data from the Australian Bureau of Statistics.

Australian coking coal shipments to China also weakened towards the end of last year.

Australian hard coking coal exports to China dropped to 171,800t in December, the lowest monthly volume since July 2012 when there were no shipments.

A similar pattern emerged for semi-soft coking coal shipments to China, with only around 110,000t shipped to China in the last four months of 2020 compared with an average 650,000t each month in the first eight months of the year.