The Chinese government is reportedly warning state-owned power plants not to buy new shipments of Australian thermal coal and instead favour domestic products.
Deputy Prime Minister Michael McCormack says he is concerned coal exporters could face a tougher time selling the commodity into China.
Mr McCormack said Trade Minister Simon Birmingham and diplomats were attempting to fix the issue.
“Of course we’re very concerned by it,” he told the ABC on Friday.
“But we have a two-way relationship with China. China needs Australia as much as Australia needs China and we want to make sure that whatever we do is in a careful and considered way.”
The Global Times – considered a media voice of the Chinese government – has warned Australian iron ore imports could be hurt by political tensions between the two countries.
“This is another implicit warning to Australia,” Yu Lei, a chief research fellow at Liaocheng University, told the newspaper.
“It is associated with how Australia has acted, and a general decline in demand for steel on the global level.”
China cooling on Australian coal could signal the latest escalation in trade tensions between the two nations.
Coal exports faced delays at Chinese ports last year.
China has slapped Australian barley with an 80 per cent tariff and banned meat imports from four abattoirs.
Mr McCormack said Chinese steel mills and power plants would need high-quality Australian coal to operate.
“We want to make sure that our coal exports have a destination.
“China has long been a customer of ours. They know the quality of our coal, they know the quality of our iron ore and other resources.”
Senator Birmingham is being ignored by his Chinese counterpart.
Home Affairs Minister Peter Dutton said the stonewalling was part of China’s tactics.
“We don’t think they’ve got a legal basis for imposing these tariffs and we want them to change their position,” he told the Nine Network.
He said Australia would stand firm in its values after a push for global coronavirus inquiry stung China.
Thermal coal, which is used to generate power, is Australia’s second largest export to China after iron ore.
China has also announced new supervising rules for iron ore, with opinion divided on its impact for Australian exporters.
Senator Birmingham is hopeful the changes could speed up the entry of iron ore into China through fewer batches being checked.
“Early indications of talking to the industry are indeed that this would provide an opportunity for benefits both to China and to Australia,” he said.