Coal market faces renewed speculation China targeting Australia

A coal market only just rebounding from the lowest price in four years might now need to grapple with the prospect of China renewing its restrictions on Australian supplies.

Two influential coal industry publications within China have raised the specter of the country tightening imports from Australia, which comes along with recent tensions between the two nations over the roots of the global pandemic.

Chinese officials are already considering targeting the nation’s exports including wine, dairy and seafood, according to people familiar with the matter, after Australia raised Beijing’s ire by calling for an investigation into the origins of the coronavirus.

The coal rumors are bringing back memories of early last year, when China slowed customs clearance of Australian supply amid speculation that Beijing was retaliating against a ban on Chinese telecommunications giant Huawei Technologies Co.

After coal imports surged earlier this year as lockdown measures reduced mine output, speculation has built that China is now throttling back imports to rebalance the market and stabilize prices. Beijing often uses import controls to try to keep prices in a range that is high enough for domestic miners while low enough for power generators.

On Tuesday, industry site MySteel.net reported “market chatter” that Chinese power plants may have been ordered to cease importing Australian coal. On Wednesday a publication affiliated with the China Coal Transport and Distribution Association speculated that the government may tighten Australian imports.

Rumors of the restrictions are coming as coal prices are starting to rebound after hitting the lowest level since 2016 on weak demand following the pandemic. Futures for coal loaded in Newcastle, Australia, settled at $57.05 a ton on Wednesday, up 12% from the low on April 27.