http://www.theaustralian.com.au/business
AUSTRALIA’S thermal coal miners, already struggling to turn a profit, could be further hit with an import ban on lower quality coal by China.
The price of thermal coal has come under renewed pressure amid fears that the economic powerhouse would implement quality-based restrictions on coal imports, which could impact almost half of Australia’s exports to the Asian giant.
Macquarie analyst Stefan Ljubisavljevic has outlined that while he remained sceptical that the proposed ban on high-ash, high-sulphur material would be enacted, on a “worst-case-scenario” basis it was Australia’s miners that would suffer.
The ban, proposed by the China National Coal Association and being scrutinised by the National Development and Reform Commission, would prohibit all coal imports above 15 per cent ash and 0.6 per cent sulphur.
“Based on Wood Mackenzie data, almost half of all Australian exportable thermal coal would not meet a 15 per cent ash and 0.6 per cent sulphur cut-off. As a result, implementation of this draft ban would, in our opinion, put at risk about 40 million tonnes per annum of Australian coal volume,” Mr Ljubisavljevic said.
The Macquarie analyst said that if the ban was enacted, the best-case scenario for the thermal coal market would be that exports from Russia and Indonesia would simply be redirected to China from other destinations. Australian and South African material would then be redirected to all other buyers.
“However, in practice, things wouldn’t nearly be as simple, given that the policy impacts all supply regions to a greater or lesser extent, and given that the stated objective behind such a Chinese policy is to ‘restore balance’ to the domestic coal industry,” Mr Ljubisavljevic said.
“This is often then combined with the broader Chinese goal of addressing pollution. In other words, overall thermal coal imports should fall.”
Citi’s Ivan Szpakowski also remained sceptical about the proposed ban but he also believed Australian exports with high ash content would be most vulnerable.
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