China appears to be in the process of backing away from a policy designed to bring Australia’s economy to its knees.
This week, independent reports emerged from both Bloomberg and Reuters that China’s ban on importing Australian coal could soon be lifted.
At the start of the Covid-19 pandemic, China imposed a series of bans on Australian products including iron ore, wine, beef, barley and even lobsters to create “economic pain ” after Prime Minister Scott Morrison called for an inquiry into the origins of the coronavirus.
Although the coal ban was never officially added to the list, over the past two years China has shadow-banned the Australian resource, placing it on an invisible blacklist.
The coal ban wiped a billion dollars off Australia’s balance sheet.
Now, however, Chinese state-owned enterprises have begun making “initial inquiries” about coal imports in the near future, including prices and availability, and four major Chinese importers have been cleared to resume trading with their Australian counterparts, according to reports.
The sudden 180-degree U-turn reportedly comes as China faces the prospect of more power outages with some cities already frozen in the nation’s northeast.
This will be the first time since China waged its trade war against Australia that the Asian superpower has backed down and gone back.
On Tuesday, China’s National Development and Reform Commission informed four importers, including the country’s largest steelmaker Baowu, that Australian coal could be brought in.
This was according to reports from Bloomberg and Reuters.
Comments from a Council of State meeting have also fueled hopes.
Chinese Premier Li Keqiang said a day after the reports emerged that “stronger efforts must be made to ensure a secure and stable energy supply.
“As the momentum of economic recovery and stable growth continues, demand for energy increases.”
The news has caused a lot of activity on the stock market and has already had an impact on coal prices.
GlobalCOAL reported that metallurgical coal is trading at $302 a tonne, while the Singapore bourse has also breached the $300 a tonne mark.
Industry group the Minerals Council of Australia said it was “cautiously optimistic” after the reports.
It comes just a month after Foreign Minister Penny Wong visited China in the first such profile in three years, in what many saw as a thaw in hostility between the two nations.
The ongoing ban has certainly affected the Australian economy, but it has also adversely affected Chinese citizens.
Australia quickly recovered after finding alternative markets in India, Japan and South Korea, among others.
Meanwhile, China experienced blackouts for several months in the winter of 2022, but was unable to buy Aussie coal, which would have been an easy fix.
Although more than two-thirds of China’s electricity comes from coal-fired plants, the nation refused to buy Australian coal, officially, anyway.
Reports from September 2021 claimed China was paying $595 a tonne for coal to come through an intermediary, which is more than double what Australian coal producers were selling it for at the time.
The Australian Strategic Policy Institute estimated that China was losing $2 billion a week by paying this premium price to receive the product through a third party.
“Each million tons of coal has recently cost China’s steel mills more than $400 million, compared with about $250 million paid by steel mills everywhere,” the Institute wrote.
“Because China’s factories use nearly two million tons of coal every day, the premium it pays over coal costs in the rest of the world adds up to about $2 billion a week.”
Read related topics: China