China takes shipments of Australian coal despite import ban amid squeeze in power

China has started offloading a small number of Australian coal shipments despite an unofficial import ban, analysts said, highlighting the intensity of the energy crisis facing the world’s second-largest economy.

Nick Ristic, senior dry cargo analyst at Braemar ACM Shipbroking, said a handful of Australian cargoes waiting outside Chinese ports since a ban went into effect a year ago had surrendered docked last month and a change in draft had been observed, indicating that the coal had been unloaded. He said 450,000 tonnes of coal had been unloaded.

Energy research firm Kpler also said a total of five ships waiting offshore unloaded 383,000 tonnes of Australian thermal coal in China last month.

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

Last year, Beijing reportedly ordered energy companies and state-owned steel mills to immediately stop importing Australian coal, dealing a blow to the country’s A $ 55 billion coal export industry (39 billion dollars) per year.

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

But since then, Chinese provinces have been hit by such severe power rationing that in some places factories have only been allowed to operate two days a week, threatening economic growth and the supply chain. global.

Lara Dong, who leads power and renewable energy research in Greater China at IHS Markit, said the decision to allow a few shipments to start delivery was unlikely to be a sign of a reversal. broader policy. “I see this as a sign of policy easing, it doesn’t seem to mean much of a difference in coal imports from Australia,” she said.

The shortages, which have also affected some domestic users, have intensified largely due to coal supply shortages and rising domestic and international prices. This made coal-fired power generation unprofitable due to price controls.

The most actively traded coal contract on the Zhengzhou Commodity Exchange was near a record high of Rmb 1,393.60, or $ 216 a tonne, on Thursday, the last day before a week-long public holiday in China. It increased by almost 75% last month.

Provinces, including Jilin, have called in recent days for increased imports of coal from Indonesia, Russia and Mongolia. Information released on Monday said China’s Zhejiang Province imported its first shipment of thermal coal from Kazakhstan.

Dong said it was not clear whether the imports would also be a remedy for the country’s electricity problems. “It’s so expensive now. The government encourages imports but who will pay?

Line chart of Rmb per metric ton showing thermal coal contract on the Chinese Zhengzhou Commodity Exchange

Coal shipped from Indonesia – China’s biggest supplier – rose sharply last week. Mid-grade Indonesian coal was changing hands at a record high of $ 166.5 per tonne, the highest level since Argus began pricing Indonesian coal in 2004.

While China’s largest coal miners have pledged to ramp up production and do everything to help weather the energy crisis, analysts are skeptical of the ability to react quickly enough to make a difference this winter.

Goldman Sachs last week cut its growth forecast for China for 2021 to 7.8% from 8.2%, citing “significant downward pressure” from energy shortages.

Conflicting political signals have also contributed to the crisis, as the country implements so-called “double-check” regulations aimed at reducing both energy consumption and energy intensity. Provinces have battled to meet strict consumption targets under the rules, after large numbers failed to meet targets in the first half of the year.

Last year, Xi Jinping, Chinese President, pledged that the world’s biggest polluter would peak in carbon emissions by 2030 and carbon neutrality by 2060.

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