Expectations that Chinese leader Xi Jinping will reverse his unofficial ban on Australian coal imports are growing as the country’s economic problems continue to escalate.
Key points:
- Analysts in China say high price of imported coking coal is causing pain in the country’s steel sector
- According to reports, China’s leadership is concerned about the recurrence of electricity shortages last year
- Wang Yi said China was willing to “recalibrate” its relationship with Australia
There is no official signal from China’s Ministry of Commerce to lift the ban, but Chinese analysts say the rising cost of coal imported from other countries is hurting both steelmakers and the energy sector.
A Beijing analyst who declined to be appointed because of the political sensitivity of the issue said the high price of imported coking coal was causing great pain to the country’s steel sector.
He said allowing Australian shipments to return would likely reduce production costs, although the analyst knew of no plan to do so.
Bloomberg previously reported that a proposal was being made to resume coal imports from Australia to China’s top executives amid fears that European restrictions on Russian exports would further raise world prices.
According to reports, China’s leadership is concerned about the recurrence of last year’s electricity shortage. (ABC News)
Australia exported about $ 14 billion worth of coal to China in 2019, most of this coking coal for steelmaking, but the thermal coal market for electricity generation is also extremely tight .
Reports say China’s leadership is concerned about the recurrence of electricity shortages last year that occurred when high global coal coal prices made electricity generation unprofitable for many coal-fired power plant operators.
In recent years, China has drastically increased its domestic thermal coal production, with imports only playing a minor role.
The ban of Mr. Some of Australia’s imports, while not the main cause of electricity shortages, nevertheless played a role in exacerbating the problems last year.
Their bans on Australian shipments in late 2020 were never formally announced or confirmed by the Chinese side, and initially caused major problems for shipping crews stuck to bulk carriers loaded with Australian coal waiting in Chinese ports.
The bans, however, did not achieve the apparent desired effect of financially forcing the Morrison government to change its approach to China.
China reports worse-than-expected economic growth figures
The election of the Albanian government, in addition to the high world prices of raw materials caused by sanctions due to Russia’s war against Ukraine, seems to have caused Beijing to change its approach.
A recent meeting between Australia’s Foreign Minister Penny Wong and China’s Foreign Minister Wang Yi could have set the conditions for a coal policy setback.
Wang Yi says China is willing to “recalibrate” its relationship with Australia. (Reuters: Daniel Munoz)
At that meeting, Wang said China was willing to “recalibrate” its relationship with Australia, although it still set four requirements for the Australian side to improve ties.
Chinese Trade Ministry spokesman Shu Jueting said at a regular news conference on Thursday that Australia was expected to “summarize the past, look to the future” and “maintain the principle of mutual respect” to improve economic relations. and bilateral trade.
“The healthy and stable development of China-Australia relations is in line with the fundamental interests and common aspirations of the two peoples, and is also conducive to peace, stability and prosperity in the Asia-Pacific region. Pacific, “Ms. Shu.
Coal speculation came when the Chinese government reported much worse-than-expected second-quarter economic growth figures.
Officially, China’s economy grew 0.4 percent more between April and June compared to the previous year, below expectations of 1 percent.
But some independent analysts doubt the economy grew as China’s largest city, Shanghai, was closed for part of that time and other cities were plunged into restrictions again and again for outbreaks. of COVID-19.
Domestic consumption is also weak, with imports in June officially only 1% higher than at the same time last year.
“Rising unemployment, declining household incomes and COVID’s endless confinements have reduced domestic consumption,” Beijing economist Michael Pettis wrote on Twitter.
“When weak domestic consumer demand is the biggest problem of an economy, lower inflation and growing trade surpluses are not indicators of success,” he wrote, responding to statements by a government official that the China did not fight rising inflation like Western countries because of its “superior”. “political system.
Dissatisfied buyers who refuse to pay mortgages
Over the past few weeks, homebuyers have threatened not to repay their mortgages until developers resume construction of homes they have already sold.
Some major Chinese banks say these troubled loans are manageable, but the government is holding talks on the crisis.
The growing movement could trigger government intervention. (Reuters: Carlos Garcia Rawlins)
The move, which appears to be gaining strength, poses a danger to a nascent recovery in the real estate sector and could trigger government intervention.
“The event is likely to spread and show that there is still a lot of foam in the real estate market,” said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management.
“People are worried that this could hurt bank lending and affect other projects that have no problems,” said Steven Leung, executive director of institutional sales at UOB broker Kay Hian in Hong Kong.
The move had spread to many Chinese provinces and involved more than 100 real estate projects, real estate consultant CRIC said in a comment warning of “systemic risks.”
ABC / Reuters