By Muyu Xu
SINGAPORE (Reuters) – The growing need to secure energy supplies following the easing of Covid-19 restrictions has prompted China to gradually resume Australian coal imports and urge domestic miners to boost their already record production.
The lifting of the unofficial ban on Australian coal imports, which were lifted in 2020 in a fit of resentment by China over issues related to the origins of Covid, is the clearest sign yet of renewed ties between the countries.
The resumption is also a reminder of their economic interdependence, as Australia’s raw materials play a crucial role in fueling the economy of China, the world’s biggest consumer and producer of coal.
Beijing’s dual approach to coal security comes as prices for power generation fuels and metallurgical coal rose after Western sanctions cut off Russian supplies following the invasion of Ukraine.
Chinese power utilities and steel mills will now have access to better quality Australian coal, while Australia, which used to be China’s second-largest coal supplier, may regain some of its market share lost to suppliers such as Russia and Mongolia.
“This development may have come from the thaw in relations between China and Australia due to the new government in Canberra,” said Pat Markey, managing director of consultancy Sierra Vista Resources.
“Many miners would welcome the opportunity to renew their trading relationships in China for both metallurgical coal and thermal coal.”
China’s state planner this week allowed three centrally backed utilities and its main steelmaker to resume coal imports from Australia.
Among them, China Energy Investment Corp has placed an order to import Australian coal, which could be loaded later this month.
Market players expect more companies to be allowed to buy Australian coal in the coming months.
Rising prices amid Russian sanctions and an expected jump in Chinese demand for coal –2% more in 2023 than last year, according to analysts at Wood Mackenzie– following the end of Covid-19 restrictions has renewed concerns about energy security.
Beijing wants to avoid a repeat of nationwide blackouts due to coal shortages in late 2021. China, the world’s largest coal producer and consumer, relies on coal to generate nearly 60% of its electricity.
The country is expected to produce a record 4.45 billion tonnes of coal in 2022, the National Energy Administration said during a Dec. 30 meeting, according to state television.
(By Muyu Xu)
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