Australian miner Whitehaven Coal said China’s easing of an unofficial ban on coal imports helped push prices for the commodity to six-month highs.
Australian coal miners expect to benefit from a thaw in relations between the two countries that has coincided with Chinese leader Xi Jinping. push to the end isolation of the country during the pandemic.
Whitehaven said Beijing’s recent announcements “to lift Covid-related restrictions and lockdowns in China and China’s restrictions on Australian coal imports fueled an uptick in metallurgical coal prices”, adding that prices had jumped above $300 a tonne for the first time since June.
China’s decision to impose official and unofficial sanctions on some Australian products in 2020 initially hit coal sector along with wine, lobsters and barley. The trade dispute was sparked by the Australian government’s call for an investigation into the origins of Covid-19.
The informal ban initially hit Australian industry, but exporters diversified and the high price of resources, including coal and gas, compensated for lost income. Australian coal was diverted to Japan, South Korea, India and Europe.
Think-tank Australia Institute calculated that coal export earnings reached A$112 billion ($75 billion) in the year to June 2022, compared with A$32 billion the previous year, due to soaring commodity prices following Russia’s invasion of Ukraine .
Whitehaven said on Friday it generated A$1 billion in cash from operations in the three months to December, with coal prices averaging A$552 a tonne in the first half, a record for the period. Metallurgical coal is used in steelmaking, while thermal coal, which is used to generate power and makes up the majority of Whitehaven’s sales, is sold at a higher price.
The company expects to post earnings before interest, tax, depreciation and amortization of A$2.6 billion in the six months to December, more than four times the A$600 million reported in the same period a year earlier. The company’s shares closed 6 percent higher at A$9.48.
Shares in Yancoal, the Australian-listed coal producer majority-owned by state-owned Chinese mining companies, closed nearly 5 percent higher after it said its cash balance hit A$2.7 billion due to high coal prices. David Moult, chief executive, told analysts it had placed two cargoes in China to be delivered in February.
Gerhard Ziems, chief financial officer of Queensland coal miner Coronado, said it would take most of 2023 to restore trade flows to China, which before the trade dispute accounted for about half of Australia’s hard coal exports.
“It will be positive for Australian coal [if China resumes trade] but I don’t think anyone sees it coming back to pre-stop levels,” he said. “I strongly believe that Chinese steel mills are looking forward to having access to Australian coal again. It’s a logical solution for them.”
Ziems added that while there were early signs that Chinese traders had returned to the market, inquiries were limited. “It’s been very subdued so far,” he said.
The Anthony Albanese government’s work to restore relations with China has been praised by the mining industry despite their opposition to further measures proposed by the federal government in recent months.
State governments have emerged as more of a concern for miners, with Queensland last year increasing royalties in the industry and New South Wales last week proposing that up to 10 per cent of its coal reserves be set aside for domestic use.