(The opinions expressed here are those of the author, Clyde Russell, a columnist for Reuters)
China is paying a heavy toll for its efforts to punish Australia by banning or restricting certain commodity imports, while conversely, Australia seems to have avoided any serious financial ramifications so far.
It is perhaps surprising that the authorities in Beijing, having witnessed how the trade war launched by former US President Donald Trump backfired on his own country, would be keen to try the same thing on Australia.
Trump tweeted in March 2018, as his administration was ramping up its tariffs against Chinese goods that “trade wars are good, and easy to win.”
It turns out that he was somewhat right, but only in the reverse of what he expected, insofar as the country that launches the trade war tends to be the loser, and the country that is the intended target seems to prosper.
Overall, Australia’s exports to China were A$13.34 billion in December, the highest since June
Coal is the highest-profile Chinese target in the Australia row. Beijing effectively all but banned imports from Australia as part of its efforts to pressure Canberra on several issues, ranging from Australia’s call for an international investigation into the origins of the coronavirus pandemic to the decision to block Huawei from Australia’s 5G network rollout.
China’s imports of Australian coal have collapsed, with Refinitiv vessel-tracking and port data showing just 687,000 tonnes were discharged in December, down from the 2020 peak of 9.46 million tonnes in June.
But the data also show that Australia’s overall exports haven’t really suffered, with December shipments of 33.82 million tonnes being the best month in 2020.
While the cold snap across north Asia boosted demand from Japan, South Korea and Taiwan, it also appears Australia has managed to ship more coal to other regional consumers, such as India, Vietnam and Thailand.
Coal is more than just a volume story, with prices moving in favour of Australia and against China.
Australia’s coal exports were worth A$3.7 billion ($2.87 billion) in December, the most since May last year, according to data from the Australian Bureau of Statistics.
The benchmark Australian thermal coal price, the Newcastle Weekly Index, as assessed by commodity price reporting agency Argus, ended at $87.52 a tonne on Jan. 22. That was up 89% from its 2020 low of $46.37, reached in September, at a time when market concern over the impact of China’s effective ban on imports was highest.
The rise in seaborne coal prices has made it more expensive for China to buy imported coal. In turn, that has allowed domestic prices to remain elevated as they aren’t facing competition from overseas producers.
The price of thermal coal at Qinhuangdao has retreated in recent days, ending at 873 yuan ($135.14) a tonne on Jan. 26, down from the recent high of 1,038 yuan.
But even with the recent drop, the Chinese benchmark is still some 87% higher than the 2020 low of 467 yuan a tonne from May – well above the 520-570 yuan range believed to be preferred by the authorities as it ensures mines remain profitable but fuel costs for utilities aren’t too high.
It’s not just coal where Australia seems to be more than holding its own in the trade dispute: exports of cereals rose to A$1.19 billion in December, the highest on record and almost three times the value of shipments in November.
China imposed an 80.5% tariff on imports of Australian barley in May last, collapsing the trade between the two nations. But while Australian barley farmers were initially hit hard, they have successfully managed to switch to alternative markets or plant other crops.
China also has an unofficial ban on imports of copper ores and concentrates from Australia, which had been its fifth biggest supplier.
However, a global shortage of mined copper ores means China is being forced to pay more for supplies. At the same time its smelters are having to pay less for treatment and refining charges, as they struggle to source material.
Again, what has happened is that China has cut itself off from a source of supply at a time of global shortage. It has imposed costs on itself and no penalty on Australian copper miners, who can sell easily to other buyers.
China hasn’t mandated any restrictions on the most important commodity it buys from Australia, namely iron ore. But it is having to pay handsomely for buying the steel-making ingredient given supply issues in Brazil, the second-largest exporter behind Australia.
Australia’s exports of metal ores, which include iron ore and copper, rose to a record A$15.2 billion in December, up 22.6% on November, according to official statistics.
Overall, Australia’s exports to China were A$13.34 billion in December, the highest since June, reflecting strong demand for iron ore, liquefied natural gas and some agricultural commodities.
Since China started its trade actions against Australia, the numbers seem to be tilting heavily in favour of Canberra.
This supports the lesson from the US-China trade dispute: if you still need the products you are targeting for tariffs or import bans, it will cost more to source them from other suppliers.
(Editing by Kenneth Maxwell)
14 Comments
Don glover
Good to read
David
It’s really sad that an article in mining.com is going to make subjective, derogatory comments, riding the anti-trump bashing train that we see in the everyday media.
The so called “trade war”, which most of the western world’s governments agree with because it mostly has to do with copyright infringement and theft by China, is not so much a trade war, rather protection of Western companies patented material as well as defending human rights.
You and your editor are doing a disservice for mining.com. If you want to be considered a reputable media outlet, you should keep your silly and divisive political comments out of your stories.
Stites
David,
I agree with your comments about China stealing intellectual property. Trump was correct in attacking China’s intellectual property thefts.
Trump also imposed punitive tariffs on Canada’s lumber, aluminium, and steel. He imposed punitive tariffs on Turkish steel and he imposed similar tariffs on other countries. Thus Trump lowered the standard of living of anybody in the United States who uses products made of lumber, steel, or aluminum. Have you priced 2 x 4s lately?
William
Well said. Thank you David
Andrew
David, “riding the anti-trump bashing train”?
“riding the Trump bashing train” surely? He needs bashing! Has there ever been a more divisive President of the United States?
John wslsh
While I have no doubt David means well is mixing apples and oranges the article is in my opinion and excellent explanation of how the Chinese bully tactics have blown up in their economic face the issue of a developer weather Western or Martian is entitled to be paid for their initiative and effort in developing something which is all patent and intellectual property law is about and then only for a relatively short period 16 years that can go to 20 years is hardly a big cost but the reality is that China is committing international crime Beyblade simply breaching international law on the right to patent and other intellectual property reward for the developers and if David doesn’t like that he should go into politics and go through the political process to see if you can change it otherwise that’s just ignore him and that’s come back to the article which I think is excellent and I think Australia having done nothing more than say the world needs to know how this virus developed so we can avoid it happening again should not have been bullied by China my view was always been the bullies at the end of cowards and fortunately America has been strong enough to stand up to them so please keep up the good work and I love the financial and economic analysis in the article don’t be distracted by someone’s political agenda about whether there should be patent rights that’s a political issue
Barry B
Trump was right for all the wrong reasons… If a country starts a trade war, voters need to see leadership is competent for the task… Election results show it wasn’t there then and it maybe the same even now… The article was pretty informative.
Michael
Well put David. I agree.
Simon
Chinese Comminist Party needs to learn to first apologise to the world for COVID 19, assure the world measures are in place it will never happen again. This bullying of countries requesting answers is not acceptable. People from these countries have and will stop buying from China. This lack of apology and bullying from the Chinese Comminist Party could signal the collapse of China as a strong economy. So China wake up!!!!
psychology
It’s hard to come by knowledgeable people about this subject,
however, you sound like you know what you’re talking about!
Thanks
Jojo
USA is still a power but Australia is just a struggling country against China. I don’t feel this cake value the candle.
Jay Lee
Trump’s trade war created the strongest economy in US history. How does this rag even make money poati g this nonsense?
not chinese
Wait and see who laughs last.
AB
Just give it a time and wait until theis “unexpected” demand from other countries deteriorates and then we will see which country has the last laugh