BHP's Chinese customers seek to defer Australian coal

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While unofficial limits are often imposed in China as a mechanism to support its domestic mining industry, commodities analysts said there were concerns in the market that Australian coal was being singled out. It is unclear whether these latest cargo deferments are due to import quotas or geopolitical tensions, and whether the latest bans are aimed at Australian products or all foreign coal.

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“It would be concerning if the rumours are true regarding an import restriction for Australian coal into China,” Mr Henry said.

China is the top importer of Australian coal, accounting for 27 per cent of Australia’s metallurgical coal in the past financial year, and 20 per cent of thermal coal.

Australian thermal coal has previously been targeted by Beijing for diplomatic reasons, including in 2019 with long port delays, and earlier this year when five state-owned power generators were verbally told to prioritise domestic coal and Russian and Indonesian imports instead. Cargoes of metallurgical coal have been considered more immune to trade bans because Chinese steelmakers rely more heavily on overseas suppliers.

Mr MacKenzie said he was “not overly concerned” about the impact of trade tensions on demand for BHP’s products, but was more concerned about the impact on the economic cycle and global growth.

“Our concern around some of these geopolitical tensions and trade wars that are going on is the impact it could have on global growth, and in a post-COVID world, that probably has even more concern,” he said.

Trade Minister Simon Birmingham said he was seeking information from Chinese authorities in response to the latest reports of import restrictions but has played down the potential impact of diplomatic reasons.

“We take the reports seriously enough certainly to try to seek assurances from Chinese authorities that they are honouring the terms of the China-Australia Free Trade Agreement and their World Trade Organisation obligations,” he said this week. “This is not the first time in recent years that we’ve seen some possible disruption to the timing and sequencing of exports of coal in particular into China.”

BHP chief executive Mike Henry revealed in August the company was seeking to exit thermal coal – the heaviest-emitting fuel and the subject of increasing political and investor pressure globally due to its contribution to global warming – by selling its assets in Australia and Colombia amid portfolio clean-up. But BHP intends to retain the majority of its metallurgical coal mines, which it believes will face greater demand in the future as steelmakers seek to decarbonise using higher-quality, less-emitting coal, while global steel demand increases.

A Global Asset Management Seoul Korea Magazine

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