Hopes dim for Australian coking coal as China digs in – what does that mean for steel production in China?

Hopes dim for Australian coking coal as China digs in – what does that mean for steel production in China?

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Oil & Gas 360 Publishers Note: Steel production in China will have a major supply issue and price increase. – This will be one issue that will effect steel production and other markets in China. – One to watch. 

Singapore, 11 November (Argus) — Chinese coking coal import prices have increased to a record premium to Australian export prices as hopes dim for a January end to China’s import ban, with Beijing today saying the onus is on Canberra to improve relations.

Premium hard coking coal prices for Australian exports have fallen by 22pc, or $30.15/t, to $105.85/t fob Australia since China began an unofficial ban on Australian coal in early October. Cfr China basis prices tumbled more than $25/t after the ban but have since erased the falls, climbing to $148.50/t cfr as buyers switch to Canadian and US coal. The cfr-fob premium has quadrupled to a record $42.65/t today from $10.50/t in early October.

Beijing’s verbal instructions to steel producers and power utilities to stop coal imports from Australia follow disruptions to other Australian imports as a result of a deterioration in China-Australia relations and expectations that more commodities could be caught up in the dispute.

Canberra has sought clarity from Beijing, but Beijing today said that Australia knows what it needs to do to improve relations.

“Once again we urge some in Australia to reflect upon their deeds, do more things that are conducive to mutual trust, co-operation and the China-Australia comprehensive strategic partnership, and create favourable conditions and atmosphere for bilateral practical co-operation across the board,” China’s foreign ministry spokesperson Wang Wenbin said today.

He cited Australia’s decision to ban Chinese telecommunications firm Huawei from its 5G network and restrictions on Chinese involvement in infrastructure, agriculture and livestock, as well as 106 anti-dumping and anti-subsidy investigations against Chinese products compared with only four investigations on Australian products by China.

“Between China and Australia, which country is breaching the principles of a market economy and the bilateral free trade agreement? And which country is reneging on its commitments, undermining co-operation and taking discriminatory measures? The facts are all too clear,” Wang said.

Coal market participants have played down the coal curbs as China’s third year of enforcing its informal annual coal import quota. Australia’s 33.59mn t of coking coal exports during January-September to China surpassed the full-year record of 31.28mn t in 2014.

Most steel producers in China are awaiting more clarity on policies, but many are not hopeful that coal imports will be allowed in the short term.

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