Chinese customs officials have issued verbal warnings to domestic power utilities and steel mills from importing any further Australian-origin coal until further notice, according to market participants.
Davis Index understands that utility, steel, and cement companies in Bayuquan, Jingtang, Fangcheng, Anhui, Guangdong, and Fujian were verbally warned by local authorities on October 1 to “not use Australian coal” or “stay away from Australian suppliers.”
Similar to events witnessed in May 2020, market participants believe that these warnings represent a retaliatory response from China’s central government over political tensions with Australian officials.
China imported approximately 74.6mn mt of coking coal in 2019, of which 41.3pc or 30.8mn mt was procured from Australia. While imports were down 0.7pc in the first eight months of 2020 at 52.7mn mt, volumes sourced from Australia have jumped 37.5pc over the same period.
Davis Index believes it is unlikely that the Chinese customs will release any official or written directives ordering the cessation of Australian coal imports, given that Australia would have grounds for complaint under the World Trade Organization rules.
The immediate “winners” from displaced Australian coking coal supply to China would be Mongolia, Russia, Canada, and, at a push, some US producers – if Chinese customs continue to approve tariff exemptions of 27.5pc on US-origin coking coal.