Wed. Oct 27th, 2021

China has begun unloading a small number of Australian coal shipments despite an unofficial import ban, analysts said, in a move that underscores the intensity of the power outage facing the world’s second largest economy.

Nick Ristic, chief dry cargo analyst at Braemar ACM Shipbroking, said a handful of Australian cargo waiting outside Chinese ports since a ban went into effect a year ago lay in bed last month and concept change was observed, which indicates that the coal unloaded. He said 450,000 tons of coal had been discharged.

Energy research company Kpler also said that a total of five vessels waiting at sea loaded 383,000 tonnes of Australian thermal coal into China last month.

It is possible that the dumped coal was resold to other countries, but traders said it was unlikely due to signals from Chinese authorities that it would be allowed to evacuate customs.

Last year, Beijing reportedly ordered state-owned energy companies and steel mills to do so. stop importing Australian coal immediately, at a stroke for the country’s $ 55 billion ($ 39 billion) a year coal export industry.

According to Argus Media, a commodity pricing group, Australia shipped 35 million tonnes of thermal coal to China in 2020 and closer to 50 million tonnes in 2018 and 2019. After November 2020, total coal exports to the Asian nation declined “Effective zero”, according to Wood Mackenzie.

But since then, the Chinese provinces have been plagued power rationing so serious that factories in some places could only operate two days a week, threatening economic growth and the global supply chain.

Lara Dong, who leads the research on power and renewable energy in Greater China at IHS Markit, said the decision to have some deliveries delivered is probably not a sign of a broader policy reversal. “I see this as a sign of a weakening of the policy, it does not seem to make a big difference in the import of coal from Australia,” she said.

The shortages, which also affected some domestic users, were largely fueled by a shortage of coal and higher local and international prices. This has made coal power generation uneconomical due to price controls.

The coal contract most actively traded on the Zhengzhou Commodity Exchange was on Thursday, the last day before a week-long public holiday in China, almost a record high of Rs 1,393.60, or $ 216 per tonne. It has risen by nearly 75 percent in the past month.

Provinces, including Jilin, have in recent days called for greater coal imports from Indonesia, Russia and Mongolia. Reports said on Monday that Zhejiang province in China had imported its first delivery of thermal coal from Kazakhstan.

Dong said it was unclear whether imports would also be a cure for the country’s power outages. “It’s so expensive now. The government encourages imports, but who will pay? ”

Line graph of Rmb per metric ton showing thermal coal contract on the Zhengzhou Commodity Exchange in China

Coal shipped from Indonesia – China’s largest supplier – jumped sharply last week. Medium-quality Indonesian coal changed hands at a record high of $ 166.5 tons, the highest level since Argus began evaluating coal in 2004.

While China’s largest coal miners have promised to increase production and do everything to help defeat the power crisis, analysts are skeptical that they can respond quickly enough to make a difference this winter.

Goldman Sachs last week downgraded its growth in China to 7.8 percent from 20.2 percent for 2021, citing “significant emphasis” on energy shortages.

Conflicting policy signals have also contributed to the crisis, as the country implements so-called ‘dual control’ regulations aimed at reducing energy consumption and energy intensity. Provinces are rushing to achieve strict consumption targets according to the rules, after a large number were unable to achieve the targets in the first half of the year.

Last year, Xi Jinping, President of China, promised that the biggest polluter in the world would do so. peak carbon emissions reached by 2030 and carbon neutrality by 2060.

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