Jakarta, CNBC Indonesia – It has been nearly a year since Australia-China relations have been strained. The reason is Australia’s push to hold China responsible for the coronavirus pandemic (Coronavirus Disease-2019/Covid-19) which is shattering the world.
The Canberra-Beijing relationship has an impact on the trade aspect. China is reluctant to buy coal from Australia. Whereas previously Australia was the largest coal supplier to the Panda Country.
Since the middle of last year, purchases of Australian coal by China have continued to decline. Last month, Australian coal entering China was 156.18 kilograms, down 97.46% from the same period in 2020 (year-on-year/yoy).
But now the situation is different. China is hit by an energy crisis because of the high price of natural gas. In the past week, the benchmark natural gas price at Henry Hub (Oklahoma, United States) jumped 14.24%. Over the past month, the price shot up 36.97% and since the end of 2020 (year-to-date/ytd) skyrocketed 146.44%.
Not only that, China’s efforts to boost the use of renewable energy have yet to reap results. Electricity generation using hydropower (hydro-power generations) is estimated to be weak.
Therefore, China has turned to coal as a primary energy source. This month, Refinitiv estimated that 10.5 million metric tons of coal would be needed to cover the shortfall hydro-power generations. In November and December 2021, the demand is estimated at 4.5 million metric tons and 3.8 million metric tons, respectively.
This need cannot be met by domestic production. The surge in Chinese coal imports is inevitable.
In September 2021, Refinitiv recorded that China’s coal imports reached 21.98 million tons. Soared 34.5% yoy.
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