Easing of China’s Australian coal ban unlikely to have major price impact

Below is Morgan Stanley’s analysis of the likely price impacts arising from the easing of China’s ban on Australian coal:

A resumption of China’s Australian coal imports

It looks possible that China will gradually ease the ban on coal imports from Australia. Both Bloomberg and McCloskey are reporting today that China’s National Development and Reform Commission (NDRC) discussed this with coal end-users on 3Jan,and that 3 utilities + 1 steel mill have been given the green light to import a still unspecified tonnage of Australian coal. While, if confirmed, this will likely mean limited initial volumes only, it signals the beginning of the long anticipated end of the import ban, which was introduced in October 2020. Back in 2019 (the last full year before the ban), China imported 46Mt of thermal coal and 31Mt of hard coking coal from Australia,20% and 41% of its total imports respectively. Looking at it the other way around, about 24% Australia’s thermal coal exports and 23% of its met-coal exports were shipped to China in 2019.

With this key coal trade off limits, trade flows have adjusted; China’s thermal coal imports now mainly come from Indonesia and Russia, while more Canadian/US/Russian met-coal made its way to China.

…would not necessarily have a major price impact.