China ban sparks Oz coal sell-off

Image of audusd daily chart

Image of audusd daily chart

"Offer prices for Australian thermal coal have slumped as a result and we heard yesterday a large Australian coal producer offering an April loading cargo of Newcastle 5,500 NAR thermal coal - the grade that goes to China - to India at $55/mt [metric tonne] FOB Newcastle".

Shares in Australian coal miners fell on Friday amid broad weakness in the resources sector, but losses eased in afternoon trade.

One market observer told Stockhead that Aussie coal is already being sold at a discount to China's competitors.

"Australians do a lot of trade with our giant neighbour to the north, however, we should be calm about this move".

On Friday, China's foreign ministry spokesman said that reports the nation had banned Australian coal imports are false.

The dollar index versus a basket of six major currencies was a touch lower at 96.451, after shedding about 0.4 per cent overnight.

AUSSIE REBOUND The Australian dollar recovered after falling more than 1 percent on Thursday, when Reuters reported the Chinese port of Dalian had banned imports of Australian coal indefinitely.

Dalian customs accounted for 7 percent of China's total coal imports in 2018, according to a report from consultancy Wood Mackenzie.

CURRENCY: The Australian dollar has recovered after falling against the U.

The indefinite ban on imports from top supplier 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.

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"We have no basis to believe that there is a ban on Australian coal exports into China or into any part of China", said Mr Birmingham, who this week asked Australia's ambassador to China, Jan Adams, to urgently clarify the situation.

"Use of more high sulfur (1.8% total sulfur) premium HCCs such as Luilin #9, blended with Mongolian second tier HCCs such as the #3 product to produce a tier 1 coke".

Prime Minister Scott Morrison denied the import restriction showed a diplomatic rift between Canberra and Beijing.

"I think people should be careful about leaping to conclusions about this", he said.

"We will, of course, continue to engage with those local ports and those authorities and work through the same regulatory issues that we have worked through in the past", he said.

Reserve Bank of Australia governor Philip Lowe chimed in by saying the amount of coal involved was relatively small and not enough to derail the Australian economy.

But he said the more likely factor behind the coal ban was less concerning because China was trying to reform its internal coal and steel industries, not necessarily target Australia. He understood that the amount being blocked was equivalent to two months' worth of exports.

"If it were to be the sign of a deterioration in the underlying political relationship between Australia and China then that would be more concerning", he said. We have to wait and see.

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