Markets

China has banned imports of Australian coal, shocking the AU Dollar

China has banned imports of Australian coal, shocking the AU Dollar”

The Australian dollar recovered a day after falling more than 1 percent after Reuters reported the Chinese port of Dalian had barred imports of Australian coal indefinitely.

The news follows the Australian government's decision this month to cancel the visa of prominent Chinese businessman Huang Xiangmo andthe banning in August a year ago of Chinese telecoms giant Huawei Technologies from supplying equipment to Australia's 5G broadband network.

China was the second-biggest customer of Australia's coal past year, accounting for about 23 per cent of total exports, according to Australian government data.

China said on Friday imports would continue, but customs has stepped up checks on foreign cargoes. "Our ambassador will be making inquiries", Frydenberg said.

On Friday, China's foreign ministry spokesman said that reports the nation had banned Australian coal imports are false.

"The Chinese have done these sort of tests before and the resources that we supply to them are vitally important for their industrialisation, for their urban growth and for us it creates huge numbers of jobs and export income here in Australia".

China is one of the country's biggest customers, buying out almost 30 percent of all the coal Australian sends overseas.

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Australia shouldn't be taking it personally.

Coal trading has become too risky, a trader remarked on Thursday February 21 amid news that customs authorities in Dalian, a major city in northeastern China, had slashed the yearly coal import quota for ports under their jurisdiction by 25%.

"Prices for low sulphur premium coals in particular would rise as importers scramble to replace Australian coals".

Australia banned Huawei in August a year ago, recently revoked the permanent residency of a Chinese billionaire over concerns that he's an agent of influence and is pressing the Chinese for access to Australian citizens and permanent residents held in prison or trapped in Xinjiang.

Prime Minister Scott Morrison also downplayed the possibility China was seeking to punish Australia over recent tensions, such as the banning of Huawei from 5G.

The ban at Dalian was due to relatively weak coal demand in northeastern China, but broadening the restriction to eastern and southern China where demand is firmer would affect downstream users like utilities and steel mills, the manager said.

The Dalian port received seven million tonnes of that.

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But Frydenberg said the coal decision was not necessarily linked.

Some investors linked the restrictions to China's trade war with the US.

See live rates for the NZ-US $ below.

"Sure, this might just be some little local difficulty - administrative problems in China logistically mean this can happen - but more likely it may be some political power play at work in a state-controlled economy".

"I don't think it's helpful... for people to leap to those sorts of conclusions". A possible China-wide ban could cause spiking metallurgical coal prices and decouple seaborne coal prices from domestic prices, according to Robin Griffin, Wood Mackenzie's research director.

Earlier this week, top coking coal exporter BHP said that China's import policies remained a source of uncertainty for the market.

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