Australia seeks clarification on China coal import 'block'

Ann Santiago
February 24, 2019

"We do understand that China applies, in some areas, restrictions in relation to the volume of coal", Birmingham told reporters in Adelaide on Friday.

"Prices for low sulphur premium coals in particular would rise as importers scramble to replace Australian coals".

However potentially dominating the attention of AUD investors next week will be the state of US-China trade talks, with the US now set to increases tariffs next Friday unless there is some kind of Breakthrough.

Most of Australia's coal to China arrives at ports in the country's south. Traders said ports at Shantou, Qingdao and Rizhao were also restricting imports of Australian coal but the slowdown also applied to shipments from other countries.

"The high quality of seaborne coal, and difficulties securing alternative coals domestically, should insulate coal exporters from much deeper cuts, despite strong signals from China", he said.

The AUD/USD pair faded an early Asian session bullish spiked to over two-week tops, levels just above the 0.7200 handle, and tumbled to fresh weekly lows in the last hour.

Chinese sources apparently revealed to S&P Global Platts as early as Wednesday this week that a meeting of Chinese port officials, held that day near Dalian port, decided that only cargoes from Indonesia and Russian Federation would be allowed into five northern ports.

That said, any uncertainties that emerge over the import policy of China - the world's biggest buyer of coking coal - will certainly keep market participants on the edge of their seats.

"China's customs assesses the safety and quality of imported coal, analyses possible risks, and conducts corresponding examination and inspection compliant with laws and regulations", Foreign Ministry spokesman Geng Shuang told the ABC.

The New Zealand dollar fell, dragged down by the Australian dollar, amid concerns about what a ban on Australian coal imports through China's northern ports in Dalian might mean.

But Frydenberg said the coal decision was not necessarily linked.

It comes as major ports elsewhere in China prolong clearing times for Australian coal to at least 40 days.

Prime Minister Scott Morrison also downplayed the possibility China was seeking to punish Australia over recent tensions, such as the banning of Huawei from 5G.

Australia banned Huawei in August past year, recently revoked the permanent residency of a Chinese billionaire over concerns that he's an agent of influence and is pressing the Chinese for access to Australian citizens and permanent residents held in prison or trapped in Xinjiang. The pound stretched its overnight rally and rose to a two-week high of $1.3077.

Central bank governor Philip Lowe said Friday it would be "concerning" if the diplomatic spats were spilling into the trading arena, but added that it would be prudent to "wait and see" what the motivations behind the Chinese actions were. Weaker coals make up the majority of Mongolian exports so in the short-term direct replacements for Australian coals would be limited.

Australia is working to clarify China's policies and to reassure Australian coal companies, he said.

But he said China was applying its rules equally to all countries and wasn't discriminating against Australia.

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