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China has no pressing need for Australian coal since it accounts for just a small part of total consumption and domestic capacity is more than sufficient to make up for any shortfall, policy advisors and industry experts said, adding that they expect domestic coal production to pick up with the release of fresh quotas for the new year.
An informal ban on Australian coal imports has contributed to a 30% surge in domestic prices for thermal coal from April lows to a record high in December with a severe winter in some areas and a manufacturing recovery exacerbating the shortage. Thermal coal futures rose by the 5% limit just minutes after trading began on Friday morning.
According to media reports, Australian coal shipments have been delayed for months at Chinese ports as trade tensions between Beijing and Canberra flared.
While Beijing is yet to acknowledge the ban, the National Development and Reform Committee, the top planning body, left out Australian coal when it asked importers to beef up coal purchases to tame prices and relieve the energy shortage in some coastal cities, industry players said, confirming news that was first reported in Chinese media.
China has also imposed anti-dumping tariffs on Australian barley and wine and resorted to other steps such as delaying customs clearance of Australian lobster. MNI previously reported that the actions are linked to Canberra's hawkish stance on China, including its decision to ban Chinese telecommunication giant Huawei from participating in its 5G network.
"China is far from being dependent on such imports," said Lin Boqiang, Dean of China Institute for Studies in Energy Policy at Ximen University. "Coal imports are a very small proportion of China's coal consumption and Australian coal takes an even smaller part," Lin said.
"The current high coal prices are more due to strong energy demand. The winter is unusually cold this year and manufacturers in southeastern China are doing unexpectedly well in terms of exports," Lin added.
"It will be impossible for Australian coal to enter China in the near term," said Jia Na, a coal analyst at consulting firm Today Think Tank. Jia expects the thermal coal shortage to last several weeks until mines receive production quotas for the new year and increase output. Inner Mongolia and Shanxi, China's two biggest coal mining regions, can produce about 90 million tonnes per month whereas imports total just 20 million to 30 million tonnes per month, she said.
One advisor who specialises in the energy sector and didn't want to be named said the ban is a good opportunity for China to reduce its reliance on coal given Beijing's pledge to reach peak greenhouse gas emissions by 2030. Doing without Australian coal fits into China's green strategy, he said.