Restore relations between China and Australia
Shares of Australian coal exporters, including Whitehaven Coal Ltd and Yancoal Australia Ltd, jumped on news of an easing of the ban, while shares of domestic producers in China such as Yankuang Energy Group Co due to prospects of increased supplies.
The Australian dollar continued its gains, as its value rose by 1.3%, to record 68.17 US cents, which is the largest rise in nearly three weeks.
Australian Foreign Minister Penny Wong flew to Beijing in December for her first official visit in years, while Australian officials indicated the country was ready to reconsider its status with China in the World Trade Organization if Beijing lifted its restrictions.
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Enhancing competition for the supply of coal
Chinese authorities had already considered a possible easing of restrictions on Australian coal last July, people familiar with the talks said at the time. China’s bureaucrats seek to avoid any recurrence of supply shortages energy As widespread as it was in 2021 and more outages late last year. There are also concerns that European restrictions on Russian energy supplies could boost competition for coal from major suppliers to China such as Indonesia.
Australian coal exporters have shifted their focus to markets elsewhere in the country Asia AndEurope Amid the exacerbation of the energy crisis, which has strengthened global competition for the commodity, which may limit the impact of any policy reversal adopted by China.
The spot market currently has limited supplies, and China has boosted domestic coal production to a record level to reduce the country’s dependence on imports.
Australian coal exports
“In terms of actual trade flows, it has a ‘big yawn’,” said Tim Baker, head of macro research at Deutsche Bank AG in Sydney. “Australia’s coal exports have risen exceptionally, even though China is not getting any,” he added.
However, Australia’s supply of coal, which is known for its high quality, is likely to see significant demand.
Ray Atrill, head of foreign exchange strategy at the National Australia Bank in Sydney, said the return of China as a buyer of Australian coal cargoes could also help lift prices and there could be an overall impact on sentiment on evidence of improving relations with China.
China previously restricted a range of Australian imports from coal and wine to beef and lobster.