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China Boosts Coal Output


January 12, 2023 - The increasing need to secure energy supplies after easing Covid-19 restrictions has pushed China to gradually resume Australian coal imports and urge domestic miners to boost their already record output.

The lifting of the unofficial ban on Australian coal imports, which were halted in 2020 in a fit of Chinese pique over questions on Covid's origins, is the clearest sign yet of the renewed ties between them.

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The resumption is also a reminder of their economic interdependence as Australia's raw materials play a crucial role in fuelling the export-oriented economy of China, the world's biggest coal consumer and producer.

The decision came after the Chinese and Australian leaders met for the first time in six years at the G-20 summit in November, notably after a change in the Australian ruling party following elections in May. Australian Foreign Minister Penny Wong followed that meeting with a visit with her counterpart in Beijing last month.

Beijing's two-pronged approach to coal security comes as prices for power generation fuels and coking coal surged after Western sanctions disrupted Russian supplies after its invasion of Ukraine.

Chinese utilities and steelmakers will now have access to better quality Australian coal, while Australia, which used to be the second-largest coal supplier to China, could recover some of its market share lost to suppliers including Russia and Mongolia.

"This development may have stemmed from the thawing of relations between China and Australia given the new government in Canberra," said Pat Markey, managing director at consultancy Sierra Vista Resources.

"Many miners would welcome the opportunity to renew their commercial relationships in China for both metallurgical coal and thermal coal."

China's state planner this week allowed three central government-backed utilities and its top steelmaker to resume coal imports from Australia. Among them, China Energy Investment Corp has placed an order to import Australian coal which could load later this month.