Since banning coal from Australia, China has had to source supplies from more distant sources or increase its reliance of lower-quality coal from Chinese mines.
In 2020, Beijing suspended timber exports from some Australian states by claiming logs were infected with pests. As a result of those suspensions, no exports of Australian timber logs have taken place to China in more than two years, affecting about $600 million in trade.
The unofficial ban on Australia coal saw China's imports of seaborne coking coal plunge, and unlike thermal coal they have not recovered and were just 2.14 million tonnes in December 2022, or just under 30% of June 2020 levels.
China has removed all remaining curbs on Australian coal imports, putting an end to trade restrictions that have been in place since 2020.
From May 2020 Beijing blocked the import of roughly a dozen Australian goods for which China was the major market, cutting imports worth around AU$20 billion (US$13.4 billion) annually.
Two types of sanctions regimes
Australia implements United Nations Security Council (UNSC) sanctions regimes and Australian autonomous sanctions regimes. UNSC sanctions regimes are imposed by the UNSC and Australia is obliged to implement them as a matter of international law.
On 19 May 2020 it imposed a combined 80.5% tariff on Australian barley, comprised of a 73.6% anti-dumping duty and a 6.9% countervailing duty. The Australian Government does not agree with China's ruling on both dumping and subsidisation (Statement by Trade Minister, 20 May 2020).
In addition, since early 2022 Australia has hit its production limits and is facing difficulties to expand its coal production and export capacity swiftly. Therefore Australia has limited capacity and economic interests in terms of restarting coal export to China.
China was a significant consumer of Australian coal until a non-official ban was imposed due to heightened political tensions between the two countries. Australian officials have stated that lifting the ban would be a crucial move in the process of rebuilding relations between the two nations.
This advantage is driving Chinese buying of Australian coal, with Kpler estimating that arrivals in April will reach 5.04 million tonnes, with thermal coal accounting for 4.72 million tonnes.
WHAT DID THE REPRISALS INVOLVE? China issued verbal instructions to buyers to avoid Australian goods such as coal and cotton, and imposed anti-dumping tariffs on barley and wine.
In 2019-20, exports of iron ore accounted for 56% of all Australian goods exported to China and was a significant driver of the increase in exports between 2014-15 and 2019-20.
Australia is China's sixth largest trading partner; it is China's fifth biggest supplier of imports and its tenth biggest customer for exports. Twenty-five per cent of Australia's manufactured imports come from China; 13% of its exports are thermal coal to China. A two-way investment relationship is also developing.
Tokyo | China will boost domestic iron ore production by 30 per cent, significantly ramp up investments in overseas mines and strengthen scrap steel recycling under a plan designed to break Beijing's dependency on Australia's most valuable commodity export.
China is one of Australia's biggest export markets. In 2019, Australia exported just over 300,000 tonnes of beef to China, before informal Chinese trade measures such as suspensions on imports from specific Australian abattoirs occurred over the course of 2020.
Chinese domestic mines have said they will ramp up production in 2023. Following the ban, Australian sellers looked at markets like Japan, South Korea and Taiwan. Australia exported 92.1 million mt of thermal and coking coal to China in 2019, S&P Global data showed.
China will allow all domestic companies to import Australian coal, signaling an end to trade restrictions imposed in late 2020.
IMPACT OF TRADE RESUMPTION
While China is now expected to start buying Australian coal, the move may not immediately alter trade routes that have evolved following the unofficial ban on coal, traders and consumers say.
The resumption of Australian coal imports is unlikely to make significant changes to China's coal supply structure amid fierce competition from cheaper Russian cargoes and increasing supplies from China's domestic mines. Indonesia remained the biggest coal supplier to China during the first two months of 2023.
Natural gas, which when burned releases roughly half as much carbon dioxide as coal, offers a potential bridge from coal to renewable energy for China. How much China promotes natural gas instead of coal will have long-term consequences for not only its economy but also its relationship with Russia.
Tokyo | China imported US$42 million ($63 million) worth of Australian coal last month, according to government data, the first confirmation that Beijing has lifted an unofficial ban on the key export.
Labor and the Coalition both regard the measures Beijing rolled out in 2020 – including tariffs or bans on barley, wine, seafood, coal and timber – as a campaign of economic “coercion” aimed at forcing Australia to shift policies.
In 2021, Australia exported $138B to China. The main products exported from Australia to China were Iron Ore ($95.7B), Petroleum Gas ($15B), and Gold ($5.86B). During the last 26 years the exports of Australia to China have increased at an annualized rate of 17.2%, from $2.24B in 1995 to $138B in 2021.