How coal reconciled Australia with China

Published:

Mar 4, 2023 23:30 GMT

The Asian giant has once again bought Australian coal, ending the unofficial bans that reduced bilateral trade after the start of the covid-19 pandemic.

The demand for coal, along with other factors, has moved relations between China and Australia towards reconciliation after several years of political tensions and a reduction in bilateral trade, several media outlets from different countries acknowledged this week.

In late February, China re-imported Australian coal for the first time in two and a half years, according to a article published this Friday by The Japan Times. According to maritime transport tracking services, at least 15 vessels with 1.4 million tons of Australian coal loaded last month are now headed for China.

Meanwhile, several Australian tycoons plan to visit the Asian nation in March, including Fortescue Metals founder Andrew Forrest; the director of the mining company BHP Group, Mike Henry; and the executive director of the Treasury Wine Estate wine producer, Tim Ford, adds the Japanese media. In an attempt to rewrite the recent past, China’s ambassador to Canberra, Xiao Qian, declared in January that Chinese sanctions on Australian products do not exist officially.

The “first shot”

Guardian reported previously that the first ships loaded with Australian coal had started to arrive on February 8th. According to the British media, this step means the end of youan unofficial ban, imposed when bilateral relations were at their lowest point at the beginning of the pandemic. One of the key moments in the tensions had to do with covid-19, as Canberra pushed for an investigation into the origin of the virus, while Beijing expressed outrage at that approach.

However, the discord seems to go back further. Ambassador Xiao Qian recalled last June that Australia fired the “first shot” in the deterioration of its relations with China in 2018, when it prohibited, for security reasons, the installation of 5G telecommunications equipment from the Huawei company in its territory. In turn, Beijing announced in May 2021 the “indefinite suspension of all activities” within the framework of the China-Australia Strategic Economic Dialogue.

“It will take time”

In a recent report, analysts at the Swiss bank UBS admitted that bilateral coal trade will not recover quickly, given that Australian exporters found new markets after the dissension between the two countries. “It will take time for trading patterns to realign again, and near-term Chinese buying is likely to come solely from spot markets,” the report predicted.

However, the news that Australian coal is returning to China has significance for the Australian economy. An article from the Russian agency RBC stands out the fact that Beijing is the main consumer of Australian products. Even in 2020, in the midst of a political crisis, almost half of all Australian exports went to the Asian giant. The situation did not change until November 2022, when China was still the number one destination for australian goodsalthough the largest importer of its coal was Japan.

Beijing increases its production and consumption of coal

Between 2021 and 2022, China increased its own coal production capacities, breaking records in its deposits. Stocks of coal in power plants also rose steadily, staying at “a historically high level”, collect local media.

Beijing last year approved the biggest expansion of its coal-fired power plants since 2015, according to a joint report by the Center for Research on Clean Air and Energy (CREA) and Global Energy Monitor, two non-governmental organizations based in Finland and the US. USA, respectively. This report He showed to what extent the country depends on fossil fuel, considered one of the sources of global warming.

Not just trade

Two South China Morning Post columnists estimate that, in the midst of the rivalry between China and the United States, it is of strategic importance for Beijing the Australian Northern Territory, where thousands of US Marines stay for months each year and train with the local military. This region is also important for its potential for future cooperation between the countries of the Quadrilateral Security Dialogue, popularly known as the Quad (comprising Australia, India, Japan, and the US).

In mid-February, Australia’s Foreign Minister, Penny Wong, assured that his country does not need sanctions to act on its concerns for human rights in China, as former Prime Minister Scott Morrison had proposed, when requesting the imposition of restrictive measures against the Asian nation.

The Australian economy is based on export of raw materials. The current government intends to maintain this profile, but also betting on environmental trends. In particular, it plans to take advantage of the vast deserts that occupy the entire central region of the country to generate and then export solar energy. China is also committed to renewable energy, being a major producer of photovoltaic panels and other equipment necessary to develop the sector.