Improved China prospects for Australian coal

Brighter times for Australian mining in China - Newsreel
Brighter horizons - Australian miners are on track to snare a greater share of the Chinese market. | Photo: Graftoto8 (IStock)

Australian coal producers are on track to regain a larger share of the Chinese market off the back of improved bilateral relations.

This follows the lifting of a two-year “unofficial ban” and the resumption of tariffs on competitor markets.

The McCullough Robertson Lawyers (McR) 2024 Emerging Issues for the Australian Energy and Resources Industry report says China imported 52 million metric tonnes of Australian coal in 2023.

“This was below previous import volumes largely because of Australia’s reduced market share in the face of emerging cheaper competitors such as Mongolia and Russia,” the report says.

“However, in January 2024 China reintroduced tariffs affecting Russia, Mongolia, South Africa, Columbia, the US and Canada, as they are not party to free trade agreements with China, like Australia.”

The report, released on Friday, said while this trend paved the way for Australia to increase market share, the long-term outlook remained uncertain.

Although China was still commissioning new coal plants, its commitment to net zero by 2060 would mean a continuing fall in utilisation of coal-fired power.

The report said the Australian resources and energy sector continued to experience fluctuations despite government efforts to stabilise the industries.

“Ongoing geopolitical conflicts, demographic reshuffling and macroeconomic policy shifts will also have influence on the supply and demand for commodities generally, and in particular those which play a key part in the path to net zero,” McR said.

“Australia’s strategic focus on critical minerals aligns with the global imperative of transitioning towards a sustainable, low-carbon future.

“The abundance of these essential resources across the country positions Australia as a key player in the global supply chain. Through supportive initiatives and policy, and strong ESG credentials, Australia is proactively shaping its role in the emerging critical minerals economy.”

Other observations in the report include the following.

  • Australian export earnings for thermal coal are projected to decrease from $36 billion in 2023-24 to $21 billion by 2028-29, while for steelmaking coal, export earnings are anticipated to drop from $64 billion to $35 billion.
  • Revenues across the oil and gas markets are predicted to continue to decline through 2024.
  • Gold prices surged to an all-time high in December 2023, largely due to the continued economic uncertainty and its safe-haven status making gold an attractive asset. Australian gold miners stand to benefit by ramping up production and selling gold at elevated prices.
  • Amid current market challenges, the commitment to global net zero emissions by 2050 is expected to sustain demand for lithium. Notably, long-term prospects remain strong, fuelled by growing EV adoption and global decarbonisation efforts.
  • Economists anticipate a steadying of earnings from iron ore for at least the next three years due to softening demand, despite the forecast increase in export volumes of 1.6 percent annually to 2029.
  • As the holder of about a third of the world’s known uranium resources, Australia remains a significant exporter of uranium oxide for use in nuclear power plants.

This section of the report was authored by McCullough Robertson’s Damien Clarke, Meg Morgan, Liam Davis and Madeline Simpson.
The 2024 edition of Emerging Issues for the Australian Energy and Resources Industry is available on the McR website.

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