Australia would benefit from a lifting of China’s ban on its coal but any gains would likely be modest as miners have largely redirected supplies elsewhere, analysts said.
Shares of ASX-listed coalminers shot up on Wednesday after reports China was considering lifting its restrictions on coal imports from Australia from April. The ban was imposed in mid-2020 amid deteriorating bilateral relations that have since begun to improve.
Investors pared back their expectations of a significant boon for exporters on Thursday. Whitehaven Coal shares ended the day down 1.5%, while New Hope fell 0.7% and Yancoal closed flat. The overall market rose 0.6%.
The Albanese government said the resumption of normal trade across the board between Australia and China was “in both countries’ best interests”.
“The Australian coal industry has been successful in finding alternative markets,” a spokesperson for the resource minister, Madeleine King, said.
China-Australia relations have warmed since the change of the federal government in May, with the foreign minister, Penny Wong, last month making the first visit to Beijing by an Australian minister in three years.
China has its own motivation to resume coal imports after a severe drought reduced hydropower last year, resulting in a depletion of stockpiles of the fossil fuel.
Beijing’s imposition of restrictions on commodity imports from Australia – such as coal, wine and barley, but not iron ore – resulted in exporters finding alternative markets.
The chief executive of the Queensland Resources Council, Ian Macfarlane, said the industry would welcome any easing of restrictions and would be keen to tap any revived export opportunities.
“[I]t is worth noting that increased exports to other countries, particularly India and [elsewhere] in Asia, over the last two years have seen long-term relationships built with these countries,” Macfarlane said.
“These alternative markets to China are now seen by Queensland coal exporters as stable, long-term customers for Queensland coal.”
The chief economist at Betashares, David Bassanese, said China may be reconsidering its ban on Australian coal because of ongoing uncertainty about global supplies given the war in Ukraine and resulting sanctions on energy exporter Russia.
Since banning coal from Australia, China has had to source supplies from more distant sources or increase its reliance of lower-quality coal from Chinese mines.
A resumption of coal imports from Australia “should help our coal export prices to a degree, as the price premium for better quality coal that Australian tends to produce is enhanced”, Bassanese said.
According to the government’s latest quarterly report on resources and energy exports, shipments of metallurgical coal used in steelmaking should rise from 164m tonnes in 2021-22 to 163m tonnes by 2023-24. Soaring prices meant export revenues for the material tripled in 2021-22 to $68b.
Thermal coal, burned mostly in power stations, has been more disrupted by the sanctions on Russia, with global supply chains “now longer and less efficient than they were in 2019”, the report said.
“High grade thermal coal (mostly originating from Australia and Russia) has been particularly affected by longer freight distances, and the price premium for high grade coal grew notably larger in 2022,” it said.
Thermal coal prices are likely to slide from historic highs of US$360 (A$523) a tonne in 2020 to about US$200/t (A$293) by 2024, the government report said.
The increasing difficult to obtain finance and insurance for coal – particularly as investors shy away from fossil fuels – means the sector could be in “a permanent higher price phase”, it said. “This is expected to reduce its competitiveness relative to other energy sources over the longer term.”
Australia exported $13.7bn worth of coal to China in 2019, almost $10bn of which was metallurgical coal.
Analysis by data firm EnergyQuest has found Australia’s exports of liquefied natural gas (LNG) were unchanged in 2022.
Higher prices meant revenues jumped 86% in the year to about $92.8bn.
“The huge growth in export revenue in 2022 is set to drive strong growth in taxation and royalties paid by Australian LNG projects, as well as helping pay for Australia’s imports,” EnergyQuest’s chief executive, Graeme Bethune, said.
The exports placed Australia among the top three LNG exporters, with Qatar and the US.
LNG exports from Western Australia and the Northern Territory were up 2.1%, while those from Queensland – which make up slightly less than a third of the total – fell 3.3%, EnergyQuest said.
