China has banned imports of Australian coal, shocking the AU Dollar

The Dalian Ports Group announced an indefinite ban on Australian thermal coal on Feb. 21 through the Reuters news agency

(Associated Press Image, modified)

(Associated Press Image, modified) (By Associated Press)

TAIPEI (Taiwan News) – China just fired a major shot in an escalating trade dispute with Australia on Thursday, Feb. 21, with the major port of Dalian's announcement of a ban on imports of Australian thermal coal.

The news caused an immediate one percent drop in currency value for the Australian dollar and is fueling speculation that a deteriorating diplomatic relationship is the reason China has targeted Australia’s second largest export.

The Dalian Port Group announced through Reuters that it was banning coal imports from Australia, and also introducing a total cap on coal imports at 12 million tons for 2019.

Australia was China’s primary supplier of coal in 2018, providing over half of the total 14 million tons imported through the ports managed by the Dalian Ports Group, which include ports of Dalian, Bayuquan, Panjin, Dandong and Beiliang.

A Chinese media steel industry website says that China will obtain most of its coal imports in 2019 from Russia and Indonesia, reports Sydney Morning Herald.

According to the Reuters source, China decided to ban Australian coal in early February, but a clearing time of 40 days had reportedly been agreed upon before the ban would take full effect. The announcement from Dalian Ports Group caught Australian along with coal and currency markets by surprise.

No reason was given by the Dalian Ports Group for the decision, and ostensibly cutting the 40 day clearing time.

Australian Trade Minister, Simon Birmingham, has called the reports “unconfirmed and unsourced,” and says the Australian Ambassador to Beijing is inquiring with authorities about the decision to clarify the veracity of the reports.

China’s Foreign Ministry Spokesperson, Geng Shuang, has said the decision is related to “environmental protection” and the government “conducting risk analysis.”

According to the Sydney Morning Herald, trade talks between the Australian and Chinese government over coal imports have already been taking place concerning metallurgical coal and coking coal.

The ban on thermal coal, which may seem sudden, according to one analyst, should not be surprising. The analyst from MineLife, Gavin Wendt was quoted by the Sydney Morning Herald.

"This seems to be an escalation of what is already happening between China and Australia. They've singled out only Australian coal. One has to interpret it has having to do with the icy political relationship between Australia and China."

Reportedly, ships importing coal into China in recent weeks have faced uncommonly long delays in dealings with Chinese port customs.