February 2023
AME expects that demand for coal will significantly improve in the new year with China prepared to lift a two-year old unofficial ban on Australian coal imports. The Chinese government essentially banned Australian coal imports in early October 2020 and has only allowed customs clearance for Australian coal loaded on vessels during China's energy crisis in late 2021.

The unofficial ban came in response to rising political tensions between the two countries. China has since turned towards Mongolia, Russia, and Indonesia to meet its coal demand. Meanwhile, Australia has sought alternative short-term customers elsewhere in Asia, with modest success in this effort.  

Satisfying China’s Coal Demand

Prior to the unofficial ban, China was one of the largest importers of Australian coking coal, amounting to 30.9Mt and 35.4Mt in 2019 and 2020, respectively. However, China’s imports of coking coal from Australia fell to 6.2Mt in 2021.

The ban was in effect for the majority of 2021, but in the December quarter, China released Australian coking coal during its coal shortage late 2021. In October, 0.7Mt of coal was released, followed by 2.7Mt in November and 2.4Mt in December. In the following year, imports of Australia coal further decreased to 2.2Mt, a drop of 65% year on year.

In its abstinence from Australian metallurgical coal, China increased imports not only from Mongolia and Russia, but USA and Canada as well. Mongolia’s coal exports dropped to 14.1Mt in 2021 compared to 23.8Mt in the previous year as a result of multiple border check station suspensions but recovered and grew to 25.6Mt in 2022, a surge of 82% year on year, to become the largest exporter of coking coal for China in 2022.

Imports of coking coal from Russia showed drastic growth, from 6.7Mt in 2020 up to 10.7Mt and 21.1Mt in 2021 and 2022, respectively. This increase resulted from a combination of China’s need to meet demand without Australian coal demand, as well as the consequences of the Russian-Ukraine conflict.

The costs per tonne for coal from Mongolia and Russia were on average US$178 and US$217, respectively. These prices were significantly lower compared to importing from USA and Canada, as average costs in 2022 were US$410 and US$378, respectively. The difference in prices were due to low freight costs from Mongolia and Russia, as well as the lack of demand for Russian coal.

China’s overall import volume of coking coal dropped from 72.6Mt in 2020 to 55.6Mt in 2021, which was a reduction of 24%. However, import volumes rose again to 63.9Mt in 2022, an increase of 15%, despite the ban on Australian coal. China’s coal demands are expected to continue to increase, which will be further intensified by the easing of Covid-19 restrictions since December 2022.



Steel Demand

AME’s crude steel production forecast for China in 2023 is 1,023Mt, flat year on year. China is aiming to achieve peak carbon emissions by 2030, and net zero by 2060, in what is known as ‘Dual Carbon’ targets. China’s steel industry is maturing, and growth in quantity of crude steel expansions is slowing. While many new integrated steel mills are under construction and planned, the majority are intended to replace older, outdated plants.

China is expanding its hot strip mill capacity in anticipation of a shifting emphasis from long steel for construction to flat steel for manufacturing as the country seeks quality over quantity.

China’s economy and steel production were hampered by Covid restrictions and testing during 2022. Since lifting Covid restrictions, China has switched to prioritising economic recovery, however, stimulus measures of infrastructure projects and favourable incentives for the housing market will take time to flow into steel demand.



Most steel plants in China have been changing their blends to include more domestic coal. Over the medium term, this will continue to be the case in China, but there will be import spikes as the country’s domestic production will not be enough to meet demand. China’s export metallurgical demand will remain flat averaging 70Mt till 2040.

As China’s industrial development continues to mature, more scrap will circulate in the economy, negatively impacting the country’s coking coal demand due to the increased use of electric arc furnaces (EAF) production.


Australian Coal Adapting to Ban

Australia’s export of metallurgical coal to China in 2019 was the largest it’s been in the last seven years, at 42.6Mt. Within the first half of 2020, export volumes remained high at 10.6Mt in Q1 and 16.45Mt in Q2.

However, after the Australian coal ban came into effect in October, more than 50 ships carrying Australia coal soon became stranded at Chinese ports, which amounted to more than 5.7Mt. In the following months, neither Gladstone nor Newcastle, two of Australia’s busiest coal terminals, had any China-bound ship leave port.

Australian coal companies were able to find alternative markets in Asia and the surrounding regions in which to unload their coal. Coking coal exports to Korea floated around 18Mtpa prior to 2021, which spiked to 23.1Mt and 20.5Mt in 2021 and 2022, respectively.

Similarly, exports to India rose from 43.2Mt in 2020 to 52.7Mt in 2021, and exports to Japan surged from 30.9Mt to 39.7Mt in 2020 and 2021, respectively. The impact of China’s ban on the Australian coal industry was softened as a result of finding success in market diversification, in addition to inflated international prices.



China-Australia relations began to recover as elections in Australia in 2022 resulted in a change in government. President Xi met with Prime Minister Albanese at the G-20 Bali summit, the first meeting since 2016 between Xi and an Australian prime minister. Shortly after, Australia’s newly appointed Foreign Minister Penny Wong visited Chinese Foreign Minister Wang Yi in December, the first visit to Beijing by an Australian minister in three years.

The ban reversal will be beneficial for both countries, with China being one of the largest importers of Australian coal. Likewise, Australia was China’s largest coking coal exporter until the informal ban.

China is currently allowing only four major importers to purchase coal from Australia. This selection consists of China Baowu Steel Group, China Datang, China Huaneng Group and China Energy Investment. The first import is expected to arrive in early February.