(Bloomberg) — Coal from Australia is being diverted from China as the top buyer slows custom clearance, and is instead making its way to countries including Japan and South Korea, according to miner New Hope Corp.
Shipments from Australia to China slumped 19 percent in January from a year earlier, said Shane Stephan, the managing director of Queensland-based New Hope, citing government statistics. That’s about the time signs emerged that China was restricting Australian coal. Exports to Japan and South Korea rose 10 percent and 34 percent respectively during the period, he said on Tuesday.
China has stalled customs clearance of coal imports from Australia by as long as 40 days, raising speculation that Beijing is retaliating politically against one of its biggest suppliers. The delays may be in place until May at least, China Coal Transport & Distribution Association said in a note last week, adding that traders and power plants have avoided purchases of Australian coal.
“As an exporter of thermal coal you’ve got to be adept at being able to place coal into different markets as you see the trend,” Stephan said in a phone interview. “These periods have happened before. China has historically used imports as a balancing item on their domestic coal use.”
New Hope shares tumbled 12 percent to close at A$3.89 in Sydney, the biggest loss since October 2009. The benchmark S&P/ASX 200 Index was little changed.
China has maintained that the increased scrutiny is part of environmental standards enforcement, and said earlier this month its custom measures are “normal”. While Australia’s trade minister Simon Birmingham said the messaging received was that there are no country-specific restrictions in place, the longer processing times are significant enough for the government to engage with its Chinese counterparts.
On Tuesday, China said it strengthened inspections of coal shipments to protect the interests of its companies and the environment, according to Geng Shuang, a spokesman for the foreign ministry. The country has found issues with imported coal after increasing monitoring and analysis, he told reporters in Beijing, declining to say if supply from all countries is being tested.
Official data from China show average daily imports slumped 42 percent in February from the prior month. The government has often revised its coal import policies as a way to manage its domestic market. The country is the world’s largest user and producer of the commodity.
The big winner from the delays may be Indonesia, which is gaining market share in China at Australia’s expense, according to Credit Suisse Group AG. A lower-quality product produced by Indonesia is now about $1 short of Australia’s higher-grade coal, an occurrence the bank describes as highly irregular.
(Updates with comments from China foreign ministry in seventh paragraph.)
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