Hogsback on the China impasse

HOGSBACK reckons that calmer heads should prevail in the ongoing diplomatic dispute with China if we want to maintain the $15 billion worth of coal we currently export and the promise of further exports with our largest trading partner.
Hogsback on the China impasse	Hogsback on the China impasse	Hogsback on the China impasse	Hogsback on the China impasse	Hogsback on the China impasse

This could all have negative consequences and cost real jobs in the Australian coal industry.

Whatever you think of the tit-for-tat moves and counter-moves between Australian and Chinese politicians and officials, it can't be denied that the relationship with the world's second biggest economy is too important for the Australian industry to descend into mud-slinging.

Australia's success in exporting to China is nothing to be ashamed of. It has been built up over the last 20 years through nimble diplomacy and negotiation.

This has served the Australian economy well in the aftermath of the global financial crisis of 2008.

Australia was the envy of the world and managed to stave off a recession while many other of the world's economies languished.

It is only this year that Australia has sunk into recession because of the COVID-19 pandemic crisis and even then we have bounced back in the September quarter with the help of record iron ore exports to China. 

However, recently things are turning for the worse, with 80 Australian coal ships waiting outside Chinese ports with an estimated cargo value of $1.1 billion.

Chinese imports of Australian coking coal fell by more than 20% in October compared to the same time last year, Commonwealth Bank analysis shows.

A number of senior industry figures in both the union movement and in coal mining companies have expressed concern that the diplomatic row has gone out of control.

Construction Forestry Mining and Energy Union president Tony Maher states that this dispute could end up costing real jobs in the coal industry.

He believes that the $15 billion of coal exports can not be simply replaced by building domestic coal fired power plants, as suggested by a number of backbenchers.

"No number of new Australia coal plants could come remotely close to replacing the $15 billion annual demand for Australian coal that China creates," he said.

"That doesn't mean we should never criticise China. We need a robust relationship that acknowledges our differences.

"I am not suggesting the Australian government adopt a supine position in relation to China. Our nations have always had differences of opinion and these differences should be expressed robustly and constructively."

Looking to the future, China will increasingly need coal as it changes its focus domestically and continues to modify its infrastructure requirements. 

Australian coal could have been in the box seat to once again benefit from China's growth, but this is now in doubt as other regional exporters such as Indonesia are keen to step in and take advantage of the opportunity.

Hogsback reckons that before we get too carried away with emotionalised arguments and playing the blame game we should remember that this could all have negative consequences and cost real jobs in the Australian coal industry.