Will China stop imports of Australian coal?

China likes to use raw materials and its purchasing power as a means of political blackmail. Criticism of the all-powerful Communist Party of China will be severely punished. The most recent case: Apparently diplomatic relations between China and Australia have deteriorated to such an extent that China is said to have ordered a ban on the import of Australian coal. This is reported by several sources, including the online platform “The Assay”. According to “unnamed sources,” it was first announced on October 9th that Beijing had given verbal instructions to suspend these imports completely for an indefinite period.

Relations between Australia and China have been strained this year amid Canberra’s call for an investigation into China’s handling of the COVID-19 pandemic. Beijing originally responded with a ban on the import of Australian barley, restricted imports of wine and meat, and prevented its citizens from traveling to Australia (including for educational purposes). As all reports of the coal import ban have been unofficial, Australian Trade Minister Simon Birmingham has said that his government wants China to confirm whether it will continue to comply with the terms of the Sino-Australian free trade agreement and its World Trade Organization commitments. Meanwhile, Mark McGowan, the Prime Minister of Western Australia, has since urged the Australian government to improve its relations with China, fearing the impact this break could have on the Australian mining industry.

China has long been Australia’s largest trading partner. After iron ore and LNG gas, coal is one of Australia’s three largest export raw materials. On the Chinese side, Australia is the main supplier of iron ore and coking coal as well as an important supplier for their LNG gas and steam coal.

The data from the American analysis company Refinitiv show that imports of Australian coal to China have already declined. Total imports of Australian coal were 5.48 million tons in September, up from 6.04 million in August and 8.17 million in July of this year.

Indonesia is traditionally the largest coal supplier to China. Indonesia also shipped just 4.18 million tons in September, the lowest amount Refinitiv has recorded since tracking those numbers in 2015.

The effects for China are different: When it comes to steam coal, China can fall back on similar qualities from other regions of the world at a relatively similar price. The situation is more tense for coking coal. Australian supplies usually make up 2/3 of China’s coking coal imports. Australia’s total share of the world market for coking coal is 55%. If China stopped imports from Australia, it would have difficulty making up for that loss, both in access and cost.

China promotes climate target and builds new coal-fired power plants

However, one can also read the reduction in coal imports from Australia in the context of the climate debate. Chinese President Xi Jinping recently announced at the United Nations General Assembly in New York City during the NYC 2020 Climate Week that he wanted his country “to achieve climate neutrality by 2060”. This will not be an easy task for the world’s largest emitter of greenhouse gases (GHG).

In his speech, Xi called for a “green revolution” as the COVID-19 pandemic underscores the need to preserve the earth’s environment. Xi urged countries to achieve a “green recovery of the world economy in the post-Covid era”.

“Mankind can no longer afford to ignore nature’s repeated warnings,” Xi said, citing the 2015 Paris Climate Agreement and the efforts his country is making to achieve the agreement’s goals. He said his country would raise its emissions reduction targets with “strong policies and measures”, adding: “We aim to reduce carbon emissions [Kohlendioxid-] Emissions peak before 2030 and carbon neutral before 2060 “.

Achieving climate neutrality means that a company or country does not release any additional CO2 into the atmosphere. It can also be achieved by offsetting an amount of CO2 (CO2 trading) that is equal to the amount emitted, which could be a more likely scenario for China.

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