China is in no hurry to buy Australian coal
2023.01.11 04:09
China is in no hurry to buy Australian coal
By Ray Johnson
Budrigannews.com – Since China lifted an unofficial ban on imports last week, Chinese interest in Australian coal has been limited by the upcoming Lunar New Year holiday and high domestic inventories. As a result, few deals have been completed.
China granted permission to three power utilities and the nation’s largest steelmaker to resume Australian coal purchases for the first time since 2020 as a result of the thawing of diplomatic relations between Australia and its largest trading partner.
After a three-year hiatus, the return of coal trade between Australia and China, its largest trading partner, is being viewed as a test case for the return of shipments of other Australian goods like wine and barley, which accounted for billions of dollars in trade.
China Energy Investment Corp., one of the utilities, placed an order to purchase Australian thermal coal for late January last week. However, three industrial sources told Reuters that the appetite for new shipments by utilities that have yet to book cargoes has been dampened by ample stocks and weak demand in China.
An Australian mining executive claimed that their company was “tyre-kicking” when it received inquiries from Chinese coal buyers about the availability of cargoes of metallurgical and thermal coal for the first half of 2023. This was around the same time that the leaders of China and Australia met at the G20 conference.
He stated, however, that there have been no inquiries this week.
An analyst with China-based coal consultancy Yimei, Zhang Huan, stated in a note, “The easing of Australian coal import restriction coincide with the approach of Lunar New Year… in the short term, coal purchase from Chinese utilities remains tepid… and the impact of the return of coal still requires further observation.”
According to data compiled by the China Coal Transportation and Distribution Association (CCTD), the average daily consumption of coal at utilities in the eight coastal regions of China, a key indicator of demand for coal, was 2.03 million tonnes as of the previous week. This is a decrease of 12% from the same time period last year.
In advance of the Lunar New Year celebration, which begins on January 21 and lasts for a week, coal storage at power plants was 30.5 million tonnes, or about 9% less than last year.
A manager from a utility supported by the state stated that this is too high “to generate much buying interest of Australian coal.”
Ocoal.com, a coal consultancy based in China, reported in a note on Monday that industrial power consumption is experiencing a slow de-stocking at utilities as a result of the holiday season and rising COVID infections.
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