What forced China to buy Australian coal for the first time in a year

Highlights

  • Chinese power plants are continuously running out of thermal coal stock due to skyrocketing domestic coal prices.
  • The country softened its stance allowing 2.8Mt of Australian coal last month by clearing customs to address the acute shortage in the country's coal and power sector.

Surging energy demand coupled with a tight supply of coal has paralysed the power sector of China, forcing the country to import coal from Australia for the first time in the last year.

Power plants in the country are continuously running out of stock due to skyrocketing domestic coal prices. The situation has worsened as the power sector faces a critical supply crunch due to an unofficial ban on Australian imports, the ultimate source of coal for the country's hungry power plants.

Trade tensions between giants

Trade tensions between the two mineral-rich nations ignited in November last year when Beijing decided to block the Australian imports to punish Canberra for suggesting the name of the country in an international inquiry related to the origin of deadly coronavirus.

China’s ban on Australian coal

As a result, China had informally banned Australian coal imports in the second half of 2020, restricting nearly 73 carriers holding 5.2Mt metallurgical and ~2.6Mt thermal coal in offshore cargoes for more than three months.

Must Read: How Chinese Ban on Australian Coal Reshuffled The Global Coal Trade?

Chinese campaign of economic coercion

Additionally, the Chinese campaign of economic coercion had also blocked the import of other commodities apart from coal, including copper, timber, wine, cotton, seafood, barley, etc. However, the economic compulsions backfired enormously, leaving the nation to face intense blackouts during winters.

Interesting Read: Australian coal, iron ore on the cusp of a robust momentous 2020-21

China’s softened stance

With almost no options left, the Asian superpower softened its stance by allowing import of 2.8Mt of Australian coal last month by clearing customs to address the acute shortage in the country's coal and power sector.

Australian coal imports

Source: © Kruwt | Megapixl.com

The country’s economy was hit hard after the authorities blocked dozens of coal ships entering Chinese ports for months. Prices of metallurgical coal had skyrocketed to US$274 a tonne in October from US$100 per tonne at the time of the ban.

Steel plants of China had spent nearly US$150 million more for every tonne of coal imported during the period as the buyers were purchasing Australian coal from third-party nations to revolve the ban.

Related Watch: What is coking coal, and whereisit used?

Bottom Line

China has softened its stance on Australian coal imports as an acute shortage of coal in the country has spooked severe power crisis and huge economic losses in the country.

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