{"id":144535,"date":"2019-03-27T12:38:33","date_gmt":"2019-03-27T16:38:33","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=144535"},"modified":"2019-03-27T11:51:13","modified_gmt":"2019-03-27T15:51:13","slug":"whats-happening-with-chinese-trade-restrictions-on-australia","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/03\/whats-happening-with-chinese-trade-restrictions-on-australia\/","title":{"rendered":"What\u2019s Happening With Chinese Trade Restrictions On Australia?"},"content":{"rendered":"
March 27, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

For several months now, there has been press commentary (or perhaps speculation would be a more appropriate description) surrounding China having banned\/been in the process of banning coal imports from Australia.<\/p>\n

This is significant because not only is China Australia\u2019s largest trade partner (buying around a third of Aussie exports), it\u2019s also by far the largest importer of coal in the world. And the majority of this coal is sourced from Australia.<\/p>\n

Last year, Australia exported $27.2B in coal.\u00a0<\/strong><\/b>This makes it\u00a0the second largest export for the country, the largest being iron ore. However, iron ore is also intimately related with coal, since coking coal is used to manufacture steel.<\/p>\n

The loss of the largest market could have significant ramifications not just on the currency, but the economy. And what if the restrictions spread to other products?<\/p>\n

What\u2019s Really Going On<\/strong><\/b><\/h2>\n

Like with a lot of economic data out of\u00a0China<\/a>, the import market of coal is quite opaque. It\u2019s hard to get hard information for what officials are doing or planning to do, or why they are doing it.<\/p>

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The official\u00a0government position is that there are no restrictions on coal imports.\u00a0<\/strong><\/b>They claim that imports are\u00a0normal and rumors are \u201cfalse.\u201d However,\u00a0industry statistics show a significant drop in coal imports to China.\u00a0<\/strong><\/b>Not just from Australia, but from other countries as well (Indonesia is the second largest exporter of coal to China).<\/p>\n

The Timeline<\/strong><\/b><\/h2>\n

Press commentary started in early February, indicating that China had been restricting purchases from Australia since November. At this point, Australian coal prices had been above $100\/ton for five months. Industry reports showed that December imports dropped by 47%.<\/p>\n

The rationale proposed by the press was that China wanted to support domestic coal production and prices. However, China\u2019s largest coal miner, Shenhua Energy, reported a drop in total production during December and January. Their rivals, such as China Coal, saw their sales increase almost 30% in January.<\/p>\n

We don\u2019t have accurate prices for coal inside\u00a0China<\/a>. But, on the international market, prices have been sliding\u00a0since November. They do, however, remain not far under $100\/ton.<\/p>\n

Traders in February noted that customs clearing in the port of Dalian for Australian coal was taking significantly longer. Customs clearing was lasting up to 45 days instead of the usual week or two, and this was prompting buyers to go elsewhere.<\/p>\n

Around the same time, the Chinese foreign ministry came out to say the rumors of restrictions were \u201cfalse\u201d. They claimed that coal purchases were normal and that customs were making more \u201cquality and environmental\u201d checks.<\/p>\n

Then as of March 20th, there were reports that customs clearance on coal was being extended in other ports besides Dalian, now including Fangchen. Since then, numerous officials from the coal industry, including the China Coal Industry Association, have insisted that they saw no restrictions on Australian coal imports. Projections for coal consumption for the current year were that it would remain flat, despite energy demand increases.<\/p>\n

It\u2019s Not Official<\/strong><\/b><\/h2>\n

In the end, coal exports have been declining in measurable terms. But Chinese officials deny they are restricting imports. However, the last time Australian coal prices rose above $100\/ton, Chinese imports dwindled until the price fell.<\/p>\n

Given the ownership stake, the Chinese government has in coal production and consumption companies,they could be handling demand in order to keep the international price within targets.<\/strong><\/b><\/p>\n

This is a common practice in China for other commodities, and it would be surprising if it didn\u2019t apply to coal as well. It won\u2019t be surprising to see the government cutting customs clearance times once the price has reached a range they like.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex For several months now, there has been press commentary (or perhaps speculation would be a more appropriate description) surrounding China having banned\/been in the process of banning coal imports from Australia. This is significant because not only is China Australia\u2019s largest trade partner (buying around a third of Aussie exports), it\u2019s also by […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-144535","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/144535","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=144535"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/144535\/revisions"}],"predecessor-version":[{"id":144538,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/144535\/revisions\/144538"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=144535"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=144535"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=144535"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}