China ready to dig heels in over coal imports

CHINA has plenty of alternatives to Australian thermal coal imports and could be willing to endure pain to diversify its suppliers, according to Wood Mackenzie.
China ready to dig heels in over coal imports China ready to dig heels in over coal imports China ready to dig heels in over coal imports China ready to dig heels in over coal imports China ready to dig heels in over coal imports

There are plenty of alternative sources of coal available if China is willing to pay more.

WoodMac lead thermal coal analyst Dale Hazelton said the Chinese government may be prepared to play the long game to ensure a mix of reliable suppliers and a viable domestic coal industry.

"While having access to Australian coal certainly makes things easier for Chinese buyers, there are plenty of alternative sources available if they are willing to pay more," he said.

"International supply chains can be realigned to continue to meet China's demand."

Hazelton said domestic coal prices had been allowed to soar last year, demonstrating the Chinese government's willingness to fund this shift in the sourcing of its imports.

Australian coal exports continue to be hit by the uncertainty surrounding the coal spat with China and a COVID-19 induced slowdown in the steel industry, according to the December Resources and Energy Quarterly.

The value of metallurgical coal exports, used in steel making, is forecast to fall to $22 billion in 2020-21 from $34 billion in 2019-20, before recovering partially to $27 billion in 2021-22.

Earnings from thermal coal exports, used mainly for electricity generation, are forecast to fall from $20 billion in 2019-20 to $15 billion in 2020-21 before rising slightly to $16 billion in 2021-22.