China Will Buy Coal from Indonesia for Around $1,467 Billion

China Will Buy Coal from Indonesia for Around $1,467 Billion

About 60 Australian coal carriers are adrift because they are prohibited from unloading cargo in China. Meanwhile, China has agreed to buy thermal coal from Indonesia.

The Chinese government this week implicitly stated that metallurgical coal from Australia has “environmental quality” problems stuck in ports. Metallurgical coal is used for steel production, while thermal coal is used for electricity generation.

Coal is used for Electricity Generation

China has signaled nearly US $ 700 million or more than Australia’s 7 trillion coal is being held in ports due to “environmental quality” concerns. According to a Bloomberg report, at least 60 coal bulk carriers from Australia were stranded in November at two of China’s main ports.

The Chinese authorities previously did not explain the exact reason for the delay, but Chinese Foreign Ministry spokesman Zhao Lijian for the first time gave an explanation regarding the coal quality problem.

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In recent years, Chinese Customs has conducted monitoring and risk analysis of the safety and quality of imported coal and found imported coal that does not meet common environmental standards.

China has unofficially banned Australian coal imports since October amid deteriorating relations between the two countries and, in turn, increased imports from Mongolia and Russia.

Zhao’s spokesman said China had strengthened inspection and testing of imported coal against safety, quality, and environmental standards “to protect the environmental interests of the Chinese side”.

Buying Coal from Indonesia

Meanwhile, China said it would buy thermal coal worth US $ 1.467 billion, around Rp. 20 trillion, from Indonesia next year. This was revealed in the trade agreement between the Indonesian Coal Mining Association (APBI) and China Coal Transportation and Distribution.

It is expected that coal exports to China will increase by 200 million tons in the coming year. The agreed target number will be reviewed annually. Indonesia, the world’s largest thermal coal exporter, has used diplomatic channels to promote coal sales in Southeast Asia, particularly to Vietnam, after exports to China have slowed.

China’s thermal coal imports from Indonesia

Thermal coal is coal that will be used for electricity generation. China’s thermal coal imports from Indonesia fell 24.5 percent in the first 10 months of 2020 to 86.88 million tonnes, compared to 115.03 million in the same period last year.

Energy and Mineral Resources Minister Arifin Tasrif at the DPR, Monday, said that Indonesia’s coal production in January to October period this year reached 459 million tons. Meanwhile, domestic coal consumption in the same period reached 109 million tons.

Minister Arifin said that this year’s domestic coal consumption target in Indonesia will reach 155 million tons.

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China banned seven Australian products

Coal is one of seven Australian export products that have reportedly been the target of a ban by the Chinese government amid rising tensions in the relationship between the two countries.

Australian exporters earlier this month said their Chinese business partners had been instructed informally by local Trade Ministry officials to stop buying seven of Australia’s export products, including coal.

It is estimated that dozens of coal carriers now stranded in Chinese ports arrived there before instructions were given. The Chinese government has not directly linked the trade ban to the country’s anger against Australia.

Australian exports go to China

But his party also did not dismiss the notion that the ban was retaliation for several Australian steps, including encouraging an investigation into the origin of the Coronavirus which first broke out in Wuhan. China denies it has imposed a coordinated trade ban on Australian products.

Currently, about a third of all Australian exports go to China. Coal carriers now stranded make up a quarter of all Australian coal exports pending customs clearance in China.

China’s metallurgical coal imports from Australia slumped in October to 1.53 million tonnes or about 26 percent of total fuel imports. Despite the ban, Australia will remain the main supplier of seaborne coal to China in 2020, as Mongolia has cut its exports due to the coronavirus outbreak.

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