China Considers Lifting Australian Coal Ban Fearing Supply Squeeze

China is considering lifting a two-year ban on imported coal from Australia, looking to avoid a repeat of the shortages and blackouts from last autumn once Western sanctions on Russian coal and oil enter into force, sources with knowledge of the deliberations told Bloomberg on Thursday.

Chinese officials will pitch the proposal to lift the ban on Australian coal to senior leaders, Bloomberg’s sources said.

China is concerned that the EU ban on Russian coal would intensify a global run for non-Russian coal supply that could weaken China’s purchasing power.

In April, the EU imposed a ban on imports of coal and other solid fossil fuels from Russia as of August 2022 as part of the fifth round of EU sanctions against Russia over its invasion of Ukraine. The package includes “a prohibition to purchase, import or transfer coal and other solid fossil fuels into the EU if they originate in Russia or are exported from Russia, as from August 2022.” 

As it looks to avoid a repeat of last autumn’s coal and energy crisis, China is now considering ending the ban on Australian coal, which was enacted in October 2020 after Australia backed a call for an international inquiry into the way China handled the initial COVID outbreak.

Reports of China considering ending the ban sent shares in Australian coal companies jumping on Thursday.

In recent months, China has significantly boosted its coal production, following government orders for more coal supply. Faced with power shortages last autumn, Chinese authorities ordered an increase in domestic coal production as global coal prices soared.

In March 2022, China’s daily coal production hit a record high as it jumped by 15 percent compared to March 2021.

China has put more emphasis on energy security since the autumn of 2021. Earlier this year, China said it would continue to maximize the use of coal in the coming years as it caters to its energy security, despite pledges to contribute to global efforts to reduce emissions.

By Michael Kern for Oilprice.com

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