China to regulate higher coal import standards
Australia produces higher quality thermal coal than the likes of its competitors. Once a struggling sector, will now benefit if China pushes ahead with plans to lift import standards. According to reports, draft regulations have been released stating that China is considering banning the import and domestic delivery of poor-quality thermal coal that would favour Australian coal. Although this does little to eliminate competition from Russia and America who also produce high quality coal at a cheaper price, it will however cut off Indonesia from the equation.
The move to regulate quality standards is thought to be driven by rising pollution concerns, and a desire to protect the profits of large Chinese coal producers from lower-priced imports. If the regulation measures go ahead, about 50 million tonnes could either flood other markets or be forced to slash production. Under the terms Australian coal would potentially be required for blending with Chinese domestic coal which would have a positive impact on prices.
Recently Australia’s coal industry has been under mounting pressure, struggling to compete with lower production cost countries, resulting in jobs being slashed across the coal districts. The country’s coal sector continued to battle increasing operation and labour costs, facing strong international competition.
It was only five years ago that Australia was considered one of the most economical places to produce coal in the world: At the start of 2013 Australia was labelled a high cost producer at the time. Such conditions have led to reports saying that China are displaying a keen interest to save Adani’s Coal Project which struggled to secure financing for its Carmichael project in Australia. According to sources, the state-owned China Machinery Engineering Corporation appears to be the leading contender for engineering, procurement and construction contracts for key parts of the proposed Carmichael mine and/or rail projects.
It also seems unlikely that Carmichael coal would go to China. Although thermal coal imports into China have risen recently, the nation is reorganizing its electricity system to be less reliant on coal as it battles air pollution issues and continues to swear by its commitment to the Paris climate-change agreement.
If the project does go through, the Chinese would perhaps serve the “Belt and Road Initiative,” a US$1 trillion shelled out to build infrastructure projects, including coal-fired power plants, across ancient land and sea trade routes. CMEC itself has interests in coal-fired power projects within the Belt and Road Initiative—with Pakistan as a priority.
China is investing heavily, too, in the global energy market transformation, as seen in its phenomenal rate of new solar energy capacity installations—as much as 50 gigawatts this year alone. Any contradictory move, especially in support of what would be the largest new coal basin in world, would undermine Beijing’s credibility.