Friday, November 27, 2020

China claims 'quality' problem with Australian coal as $700 million worth sits idle off ports

It is clearly getting to be time to do something about this. Exporters who are not heavily dependant on the Chinese market could refuse all new orders from China until the existing shipments are paid for

But government action is probably needed to get enough impact. Morrison has several options, all of which would probably cause China to lose "face" so would have to be heavily telegraphed in advance

He could freeze all payments to China until China pays its bills -- including demurrage costs. China does have significant exports to Australia so losing payments for them should make an impact

He could ban all exports to China until China pays its bills. China is heavily dependent on Australia for some things -- such as metallurgical coal and iron ore -- so such a ban should cause great disruption to Chinese industry

He could let matters ride but insist that all future exports to China should be prepaid. That is a common way to deal with bad debtors. It should probably be the first option

For months, dozens of bulk carriers have been stranded off the coast of two major Chinese ports unable to unload their cargoes, with a Bloomberg estimate of more than 60 ships now in limbo in November.

Chinese authorities have not previously explained the exact reasons for the long delays, which have coincided with a series of restrictions and bans Beijing has imposed on other Australian exports amid diplomatic tensions.

But in answer to a question on Tuesday, China's Foreign Ministry spokesman Zhao Lijian has for the first time suggested quality problems are to blame.

As trade and political tensions simmer, speculation swirls about what's really going on between the two nations — and what's next on a Chinese sanctions "hit list".

"In recent years, China Customs has conducted risk monitoring and analysis on the safety and quality of imported coal and discovered imported coal not meeting environmental standards is relatively common," he said.

China has unofficially banned Australian coal imports since October amid souring relations between the two countries, and in turn, increased imports from Mongolia and Russia.

Mr Zhao said China had strengthened the examination and testing of imported coal regarding safety, quality and environmental standards "so as to better protect the legitimate interests and the environmental interests of the Chinese side".

Coal is one of seven Australian imported products that have reportedly been targeted with bans by China amid rising tensions.

Earlier this month, multiple Australian exporters said that their Chinese business partners had been informally instructed by Commerce ministry officials to stop buying seven types of Australian exports, including coal.

But many of the bulk carriers sitting off the Chinese ports arrived with their Australian cargo prior to those instructions being given.

China's Government has stopped short of directly linking the various trade measures with its anger at Australia but has made little effort to dispel the widely-held view that it is retaliation for a series of Australian moves Beijing objects to, including a public call for a coronavirus inquiry.

The Federal Government last week said the reports were "deeply troubling" but China has denied it is levying coordinated trade action against Australia.

China accounts for about one-third of Australia's total exports. The stalled shipments account for about a quarter of all imports waiting to pass customs clearance in China.

China's coking coal imports from Australia slumped in October to 1.53 million tonnes, or about 26 per cent of its total imports of the fuel, customs data showed, down from 78 per cent in March.

Despite the bans, Australia remains China's top seaborne coal supplier in 2020, as Mongolia was forced to trim exports in the first half of the year due to the coronavirus outbreak.

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