China has threatened the $47 billion coal industry in Australia as tensions between the two countries continue to rise.
Authorities in Beijing reportedly told state-owned power plants to buy coal from inside China instead of Australia, Sydney Morning Herald reported.
Previously, China banned Australian beef and imposed an 80 per cent tax on barley following Canberra’s call for an investigation into the origins of the coronavirus pandemic.
Australia’s coal industry, which brings tens of billions of dollars to the Australian economy, may also face tougher restrictions.
Australia exported 4.3 million tons of coal to China in March, an rise of 105% from March 2019.
Despite China’s failure to confirm the ban, analysts and industry insiders told the SMH that Beijing had warned state-owned power plants not to purchase Australian coal.
News began to circulate among traders following a meeting of the National Development and Reform Commission of China.
‘Either in that meeting or after that meeting, apparently five major state-owned utilities are said to have been directed to stop buying new cargoes of Australian thermal coal,’ Wood Mackenzie’s Asia-Pacific head of coal Rory Simington said.
‘The idea that the government has is that the utilities will switch to buying domestic coal to support the industry, but we think it’s more likely that the utilities will look to buy additional Russian coal or Indonesian coal.’
Another analyst told the paper that traders were told to opt for Russian coal over Australian coal.
The threat comes after China issued another warning to Australia by opening the door to new controls on Australian iron ore in an escalating trade row overshadowed by coronavirus.
New Chinese customs regulations mean that Australia’s $63 billion (£ 34 billion) of iron ore exports may be called out for extra inspections, analysts claim.
Instead of mandatory inspections, China will now carry out optional checks at the importer ‘s request – meaning that Australia’s competitors could be given priority.
China’s retaliation has given rise to fears of a global trade war involving other countries that supported the investigation, including Britain, even though Beijing claims that the changes are nothing to do with coronavirus.
Yu Lei of Liaocheng University told the Global Times, a state-controlled Chinese newspaper, ‘This is another implicit warning to Australia.
‘It is linked to how Australia has acted and to a global decline in demand for steel.’
Previously, China’s ambassador to Canberra hinted at a boycott of Australian goods after Scott Morrison’s government called for global support for the inquiry.
The World Health Organization eventually bowed to the pressure and committed to a thorough review on Monday.
Iron ore is Australia’s biggest export to China, accounting for $63 billion in 2019.
The new rules, which come into force on 1 June, state that customs officers may carry out ‘if necessary’ safety checks on toxic elements.
The General Administration of Customs has stated that the changes are meant to ‘simplify’ the process and ‘facilitate trade.’
A trader at Lianyungang Port told the Global Times that the changes would not be used to punish Australia.
‘I see it as a value-added service that will improve efficiency and inventory turnover at ports,’ he said.
But iron-ore analyst Du Hongfeng told AFR that the new system could target Australian exporters.
‘Australia has requested a groundless investigation [in coronavirus] by following a certain country (the US). That’s why the market would connect this to other issues, “he said.
A source familiar with the situation told Daily Mail Australia that it would not be shocking if the Brazilian exporter Vale were prioritized over the Australian exporters for streamlined customs processing.
Last year, China imported 1.07 billion tons of iron ore, receiving 62 per cent from Australia and 21 per cent from Brazil.
Analysts predict increased demand for Australian iron – gold this year as China embarks on more infrastructure projects and Brazilian suppliers are suffering from a coronavirus outbreak in the country.
The announcement comes on the first day of the annual meeting of the National People’s Congress to discuss economic recovery.
Trade Minister Simon Birmingham said to Daily Mail Australia: ‘We welcome any improvement in the administrative arrangements that could streamline the customs clearance of iron ore imports.’
Last week, after suspending imports from four Australian beef suppliers for 30 days on alleged labeling issues, China introduced an 80 per cent tariff on Australian barley.
Critics, including National MP Barnaby Joyce, said that China is seeking to punish Australia for calling for an investigation into the origins of the coronavirus.
Beijing denied this and said that the barley tariff was due to concerns that Australia was dumping grain at unfairly low prices, which Australia rejects.
The Global Times said that relations between the two countries have “ebbed because of Canberra’s incessant attempt to spearhead an independent analysis of the Covid-19 outbreak in China in order to stigmatize the region.”
The editorial warned that ‘China has the power to harm the Australian economy.’
‘China has the power to hurt the Aussie economy but won’t fire the first shot in a trade war,’ the publication wrote.
‘In view of past experience, China won’t be the one to take the first provocative step, but it should be noted that any further attempt to confuse malicious COVID-19 inquiries with trade would only exacerbate the tensions, driving bilateral trade off track.’
Last month the Chinese Embassy called Home Affairs Minister Peter Dutton ‘pitiful,’ ‘ignorant’ and a US ‘parrot’ after he told China to ‘answer questions’ about how coronavirus started.
On April 26 Chinese Ambassador to Australia Jingye Cheng warned that Chinese consumers may stop buying Australian products in revenge.
‘Maybe the ordinary people will think why they should drink Australian wine or eat Australian beef,’ he told the AFR.
The dispute comes after a torrid year for relations between Australia and China, which saw clashes over political interference, human rights abuses in western China and the Huawei 5 G equipment.
Former Australian Ambassador to China Geoff Raby told Daily Mail Australia that diplomatic relations have been ‘at their lowest point since they began 46 years ago.’
One-third of Australia’s exports – including iron ore, gas , coal, and food – go to China, bringing in about $135 billion a year.
Beijing has a record of exerting pressure on exporters during political disagreements.
It includes encouraging a boycott of South Korean cars after the US missile shield was deployed in 2017 and a ban on Norwegian salmon after Chinese rebel Liu Xiaobo won the Nobel Peace Prize in Oslo that same year.
‘Trade should be independent from politics, but it’s hard to completely divide them in reality,’ Mr Yu told the Global Times.
Since 2015, Australia and China have had a free trade agreement, but some exporters are still struggling as relations have soured.
In 2018, Beijing imposed new customs regulations on Australian wine resulting in shipments being held in Shanghai.
And last year, after Canberra stripped Chinese businessman Xiangmo Huang of his visa, major ports extended clearance times for Australian coal to at least 40 days, arguing that the delay was due to ‘natural’ safety checks.
