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China's embargo on Australian coal is driving up Mongolian imports of inferior high quality

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Coal, in the public domain according to Eurekalert

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Coal, in the public domain according to Eurekalert

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Guest essay by Eric Worrall

Green revolution anyone? Despite China's aggressive geopolitical games, queues are forming in Australian coal export ports as other countries awaken from their economic slumber in Covid-19.

China's ban on Australian coal is spurring imports from Mongolia, but difficulties remain

The ban on Australian coal in Beijing has spiked imports from Mongolia, which means the country could regain its position as China's leading supplier. However, Chinese users could bear the brunt of the Australian ban due to higher costs for alternatives, transportation difficulties and quality degradation

Su-Lin Tan
Published: 6:30 a.m., October 28, 2020

Chinese steel mills and power plants have started buying more coal from Mongolia after Beijing banned imports from Australia. However, due to price, quality and logistical difficulties, it will not be easy for some users to make the switch.

While politics may have played a role in the decision to phase out Australian coking and thermal coal, the practical difficulties of not doing so could force a rethinking of the ban over time, analysts said.

Coal from Mongolia, which borders China to the north, is the most obvious substitute for Australian coal, particularly due to the inability of more distant suppliers such as the US, Russia and Canada to meet a short-term surge in demand, S&P Global Platts said in a recently released update.

While users in northern China can largely make the change, users in southern China will find it harder to do so due to the logistical difficulties and costs of transporting coal from Mongolia. This will likely force many to rely on more expensive domestic coal when they no longer have access to Australian imports.

Read more: https://www.scmp.com/economy/china-economy/article/3107269/chinas-ban-australian-coal-causes-surge-imports-mongolia

So far, the ban does not appear to have affected Australia. Queues are reportedly forming in Australian coal export ports.

Australian coal exports continue despite China's ban

Release date: October 27, 2020

Australian coal shipments continued in October despite Chinese import restrictions and the wild weather that has ravaged Australia's east coast for the past four days.

Queensland coal shipments are tracked as per September and New South Wales (NSW) shipments are prior to September according to Argus' initial shipping data. Deliveries are being supported by increased demand from economies outside of China, which will reopen after the Covid-19 lockdown.

Shipments to confirmed destinations in China fell significantly in September and remained depressed in October. In all main ports, however, more than 1 million t were sent to unconfirmed destinations in both months. This is an increase from the previous months and could be shipments that eventually make it into China or shipments that are resold because they can't get into China, according to Beijing's instructions that key steelmakers and utilities stop importing Australian coal.

Read more: https://www.argusmedia.com/de/news/2153846-australian-coal-exports-hold-up-despite-china-ban

I can understand that other countries are picking up on some of the slack, but doesn't it seem strange that the Chinese import embargo had little effect? Perhaps some Chinese regional leaders are silently ignoring the import ban.

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