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Urgent investigation as Chinese port bans Australian coal imports

Coal is Australia's most valuable export.

Coal is Australia's most valuable export. Photo: Getty

Trade Minister Simon Birmingham has ordered an ­urgent investigation by Australia’s ambassador in Beijing amid reports that a major Chinese port has banned imports of Australian coal.

Coal is Australia’s biggest export earner and the Australian dollar tumbled on the news, falling more than 1 per cent to as low at $0.7081 overnight.

Treasurer Josh Frydenberg told ABC radio on Friday exports to China would continue to be strong. He warned against jumping to conclusions and repeatedly insisted the Australia-China relationship was still strong.

“It’s based on mutual respect and mutual interest and the relationship, both at a people-to-people link (level) as well as the trade and economic side, is very important to both countries,” he said.

“I think that the relationship is strong, that our exports to China will continue to be strong, as they have been in the past.”

He noted both the value and volume of our coal exports to China were larger in the final quarter of 2018 compared with the previous year.

An official at China’s Dalian Port Group told Reuters that Customs at the northern city will cap overall coal imports for 2019 through its harbours at 12 million tonnes.

The indefinite ban on imports from Australia, effective since the start of February, comes as major ports elsewhere in China prolong clearing times for Australian coal to at least 40 days.

Five harbours overseen by Dalian customs – Dalian, Bayuquan, Panjin, Dandong and Beiliang – will not allow Australian coal to clear through customs, said the official.

Coal imports from Russia and Indonesia will not be affected.

“I’m aware of unconfirmed and unsourced media reports and have asked our ambassador in Beijing to urgently clarify their veracity,” Senator Birmingham said in a statement.

“We continue to engage closely with industry on matters of market access,” he said.

“I met with the Minerals Council of Australia this week to discuss market access issues and our related representations to Chinese authorities.”

The Dalian ports handled about 14 million tonnes of coal last year, half of which was from Australia, Gu Meng, an analyst at Orient Futures, said.

The Dalian official quoted by Reuters declined to be named due to the sensitivity of the matter. Neither Dalian customs nor the General Administration of Customs immediately responded to a request for comment.

The source said he was not given a reason for the ban on Australian imports.

Senator Birmingham said he trusts the free trade agreement commitments between Australia and China will continue to be honoured.

He warned against rushing to blame the apparent impasse on diplomatic tensions with China.

“There can be a lot of administrative reasons, other issues of domestic policy or the like, that may be factors as well,” he told a Senate hearing on Thursday night.

The ban comes amid simmering tensions between Beijing and Canberra over issues such as cyber security and China’s influence in Pacific island nations. Australia recently revoked the visa of a prominent Chinese businessman, further straining ties.

Asked if the ban was related to bilateral tensions, Geng Shuang, a spokesman at China’s foreign ministry, told reporters that customs were inspecting and testing coal imports for safety and quality.

“The goals are to better safeguard the legal rights and interests of Chinese importers and to protect the environment,” he said, adding that the move was “completely normal”.

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Piles of coal on a quay at the Port of Rizhao in Rizhao city in Shandong province, China. Photo: AAP

Beijing has been trying to restrict imports of coal more generally to support domestic prices.

Spot Australian coking coal at northern Chinese port Jingtang is 200 yuan ($A42) cheaper per tonne than domestic prices, according to data tracked by Orient Futures. Prices of thermal coal are approximately the same.

Dalian handles both thermal and coking coal imports but the clampdown is expected to have a bigger impact on coking coal – used in steel making – than thermal coal, used to generate electricity.

“It is hard to find a replacement for Australian coking coal since its sulphur content is very low,” a purchasing manager at a large coke plant in Hebei province said.

“Current inventory at ports should be sufficient to support usage for one or two months, but it could be a problem in the long term, especially if other ports also tighten imports,” he added.

He declined to be named due to company policy.

The most-active coking coal contract for May delivery rose more than 2 per cent during morning trade on Thursday.

“(The restriction) will further squeeze profit margins at steel mills after Vale’s accident has already driven up iron ore prices,” said Mr Meng at Orient Futures.

-with AAP

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