Latest market news

Biden presidency could indirectly help Australian coal

  • Market: Coal
  • 10/11/20

US president-elect Joe Biden's election victory could indirectly ease Australian coal suppliers' access to China by dampening geopolitical tensions, although this is unlikely to be immediate and could hinge on actions that outgoing President Donald Trump may take before next January's handover.

Although vote counting is not officially over in a few swing states, most mainstream US media outlets have called the election after concluding that Biden has secured sufficient electoral college votes to secure victory.

China has imposed an informal ban on Australian coal since April, which some market participants said is rooted in wider geopolitical tensions between Beijing's and Australia's ally the US. This started with a trade war between the two countries before intensifying with the Covid-19 pandemic.

Beijing has refrained from officially clarifying its ban on Australian imports, presumably to avoid violating its World Trade Organisation obligations. Many Chinese coal consumers have told Argus that they were verbally warned by Beijing not to sign any term contracts for Australian coal at a recent trade fair in Shanghai.

More predictability

A Biden presidency is unlikely to immediately reverse US-China tensions as both major parties in Congress have reached a consensus on taking a tougher stance on China. But Biden has been regarded by Beijing as a more predictable president to deal with than Trump.

Biden has previously described Russia, rather than China, as a greater threat to the US. This suggests that a Biden presidency could take a more conciliatory approach towards China compared with the incumbent president, even though any such approach is likely to develop with caution against a backdrop of US-China rivalries.

Some Chinese traders and importers are cautiously optimistic that any de-escalation of US-China tensions could provide the basis for Australia-China tensions to ease, given that Australia and the US have been allies. But some traders said it will may take a long time to heal the China-Australia rift and say they will proceed carefully. Beijing does not want to risk losing face by importing Australian material after strongly objecting to Canberra's call for an independent inquiry into the origins of the Covid-19 pandemic.

Trump could also take steps that escalate tensions with China before handing over to Biden in January. But Beijing is likely to remain calm in the face of such actions, as it prepares to deal with a new incoming US administration.

A Biden presidency is expected to strive to promote renewable energy and clean energy infrastructure under a long-term target of net-zero emissions by 2050. His administration will aim to reduce coal consumption under the US's original commitments to the Paris climate change agreement concluded in 2016. He can be expected to rejoin the Paris agreement after Trump withdrew the US from the climate pact.

China still needs Australian coal

But China's appetite for coal is unlikely to be dampened in the short term as the country cannot immediately replace its coal-fired plants with renewables, despite setting a carbon-neutrality target by 2060 and promoting renewable energy. China is likely to remain an important market for Australian coal in the short term, should tensions between the two countries ease.

China's informal restrictions on seaborne coal, especially from Australia, have caused domestic shortages and spot prices to soar in the face of winter restocking demand, with coastal utilities the hardest hit.

Delivering domestic coal, which is mostly produced in north China's inland provinces, to coastal utilities by rail is expensive and logistically complicated, although rail remains the viable mode of delivery for most inland utilities. Many of China's coastal utilities are reluctant to significantly increase their spot purchases from the key coal transshipment ports of Qinhuangdao and Caofeidian despite the impending winter because current domestic spot prices have risen well above the government-set upper limit of 600 yuan/t ($90.75/t), which is deemed too high.

Beijing's informal curbs on Australian coal imports have tightened so much that a Chinese state-owned utility possibly bought a rare Capesize cargo of South African NAR 5,500 kcal/kg coal at a price that is well above offer levels of similar quality Australian coal. Freight costs for transporting South African coal to China are usually also significantly higher than for Australian material because of the longer sailing time involved.

Although China has also increased its imports of Russian coal recently, both South African and Russian NAR 5,500 kcal/kg material contain some trace elements that make them less appealing to typical Chinese customers than Australian coal.

Australian coal commands a special market position in China that makes it difficult to be replaced by material from other origins in the longer term. But even with a current wider theoretical arbitrage for Australian spot coal into China of nearly Yn280/t, many Chinese consumers remain worried about the risk of getting the coal through customs.

Although China has touted self-sufficiency in the face of deteriorating international relations with other countries, it has come at a heavier price for utilities that rely on seaborne coal. This winter could be a bitter one for Chinese utilities that have lost access to competitively priced Australian product but are reluctant to pay more for increasingly expensive domestic coal.

If trade and diplomatic tensions between Australia and China ease slowly on the back of better US-China relations under a Biden administration, Beijing could, out of necessity, gradually and quietly relax its restrictions against Australian coal.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
14/11/24

Cop: ADB, Kazakhstan tie up on early coal retirement

Cop: ADB, Kazakhstan tie up on early coal retirement

Singapore, 14 November (Argus) — The Asian Development Bank (ADB) and Kazakhstan signed an agreement at the UN Cop 29 summit in Baku, Azerbaijan on 13 November to collaborate on the possible early retirement of a coal plant in Kazakhstan. The ADB and Kazakhstan's Ministry of Energy signed the agreement to work on a pilot transaction to reduce the country's greenhouse gas (GHG) emissions, possibly through decommissioning or repurposing a pilot coal plant for renewables or other low-carbon energy technologies. The partners will conduct a feasibility study to identify which plant among a selection of coal-fired power generation, combined heat and power plants, and heat-only boilers could be viable for early retirement. The parties also agreed to analyse the impact that the early decommissioning of the plant could have on Kazakhstan's power and heat supply, and will work together on developing the country's renewable energy generation capacity, and promote regional energy trade. The agreement comes under the ADB's Energy Transition Mechanism, which aims to support the shift away from coal-fired power plants. Kazakhstan is estimated to be the eighth-largest consumer of coal worldwide, with some 25bn t of reserves, said the ADB. About 70pc of the country's electricity is produced from coal, according to the IEA. The country earlier this year projected that it will use 8.6mn t of thermal coal for its heating season this year. State-run Kazakh Invest announced in October that Chinese companies plan to invest billions of dollars in Kazakhstan's coal sector, including the construction of a power plant, even as the country plans to develop new gas fields with a total production capacity of 1bn m³/yr, to switch away from coal for power generation and domestic consumption. By Prethika Nair Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more
News

US inflation rises in October to 2.6pc


13/11/24
News
13/11/24

US inflation rises in October to 2.6pc

Houston, 13 November (Argus) — US inflation ticked higher in October, led by monthly gains in shelter, a reminder that the last lap in the Federal Reserve's marathon to bring inflation to its long-term target remains a challenge. The consumer price index (CPI) accelerated to an annual 2.6pc in October, in line with analysts' forecasts in a survey by Trading Economics, from 2.4pc in September, which was the lowest since February 2021, the Labor Department reported today. Core inflation, which strips out volatile food and energy prices, rose at a 3.3pc rate, unchanged on the month. The energy index contracted by 4.9pc over the 12 months, slowing from a decline of 6.8pc through September. The gasoline index fell by 12.2pc, slowing from a 15.3pc decrease the prior month. The fuel oil index fell by 20.8pc. Federal Reserve policymakers last week cut the target rate by a quarter point, following a half-point cut in September that kicked off an easing cycle from then-23-year highs. Inflation has slowed to near the Fed's 2pc target from highs above 9pc in mid-2022 that proved to be a major impetus behind president-elect Donald Trump's victory at the ballot box on 5 November. The CME's FedWatch tool today gives near-80pc odds of another quarter-point cut in December. "The economy can develop in a way that would cause us to go faster or slower" in adjusting rates lower, Fed chair Jerome Powell told reporters last week after the Fed decision. The food index rose by an annual 2.1pc, slowing from a 2.3pc gain through September. Shelter rose by an annual 4.9pc, unchanged. Transportation services rose by 8.2pc. New vehicles fell by 1.3pc while used vehicle prices fell by 3.4pc. Services less energy services, viewed as core services, rose by 4.8pc. On a monthly basis, CPI rose by 0.2pc in October, a fourth month of such gains after falling by 0.1pc in June. Core inflation rose by 0.3pc for a third month. Shelter accelerated to a 0.4pc monthly gain, accounting for over half of the monthly all-items increase, after a 0.2pc gain. Energy was unchanged in October after falling by 1.9pc in September from the prior month. Food rose by 0.2pc on the month, following a 0.4pc gain. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Cop: Coal exit needs new financing, flexibility: Report


12/11/24
News
12/11/24

Cop: Coal exit needs new financing, flexibility: Report

London, 12 November (Argus) — A successful transition from coal will require new financing mechanisms and flexible repurposing, according to a Coal Transition Commission report published today. Coal consumption is concentrated in emerging market and developing economies (EMDEs), which face different challenges than advanced economies — predominantly strong economic dependence on coal and a substantially younger coal-fired fleet, the report highlighted. Countries with the highest level of difficulty for this transition are Indonesia, Mongolia, China, Vietnam, India and South Africa, the commission noted. The report proposes two major options to reduce emissions from coal-fired units — early retirement and repurposing for flexible usage and retrofitting for the integration of renewable sources. Examples include flexible retrofits to ramp up or down more frequently in a supplementary role to renewable energies, co-firing with lower emission fuels such as biomass and ammonia, or equipping plants with carbon capture, utilisation and storage (CCUS). Financial feasibility Existing scale of financing is insufficient to meet coal power emissions cut targets, requiring new mechanisms for public and private investments that allow for the costs to be covered with reasonable returns, the commission said. The report calls for a regulatory approval to classify investments that reduce emissions from existing coal-fired plants to be considered "transition finance" as financing even for technologies to lower emissions has been difficult to source. For instance, South Africa has faced difficulty obtaining funds from the Just Energy Transition Partnership (JETP) owing to the lack of investible projects . In addition, many southeast Asian plants, particularly in Indonesia and Vietnam, are new and are still subject to unpaid debt . Transition financing for retrofits and flexibility would allow EMDEs to continue using their relatively new fleet while lowering emissions, limiting the financial loss, the report suggested. That said, the bulk of coal-fired units will need to be retired early to stay within the established 1.5°C global temperature rise threshold, but they need financial feasibility for prompt coal exit, the report pointed out. For example, early coal plant retirements were facilitated by private investment in the Philippines and US where the remaining costs of the plants were securitised with lower interest rates. Likewise, Singapore has piloted a transition credit as a mechanism to reduce the economic gap in the early retirements of plants. Coal remains the largest source of electricity worldwide, accounting for 36pc of global generation and 40pc of all energy sector emissions, according to the Paris-based International Energy Agency. By Bonnie Lao Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Lower Mississippi draft restrictions lifted


11/11/24
News
11/11/24

Lower Mississippi draft restrictions lifted

Houston, 11 November (Argus) — The US Coast Guard (USGC) removed draught restrictions from the lower Mississippi River on 8 November, after several rain washed across much of the Midwestern US. Draft restrictions were completely lifted for north and southbound barges on the lower Mississippi River between Tiptonville, Tennessee, to Tunica, Louisiana. Approximately 2-8 inches of rain were reported in Illinois and Missouri in the last seven days, adding around 14 inches to the lower Mississippi River, according to the National Weather Service (NWS). St Louis, Missiouri was at a high of 11.5 inches above baseline on 11 November, up from a low of -1.5ft on 1 November. The USGC has had draft restrictions in place since August, with the river system receiving a short reprieve in early October after rain from Hurricane Helene poured into the US river system. But low water levels and restrictions returned about two weeks later. Prior to recent precipitation, drafts were restricted to 10-10.5ft for southbound barges and tows could not not be greater than 6-7 barges wide. Northbound barges could not draft greater than 9.5ft, tows could not be more than six barges wide, and only four barges could be loaded. High water levels are expected to remain through November, according to NWS but barge carriers have said that water levels will slip quickly if no additional rain falls along the upper Mississippi River. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Peru bets on trade ties with Asia as Apec starts


11/11/24
News
11/11/24

Peru bets on trade ties with Asia as Apec starts

Lima, 11 November (Argus) — Heads of 16 countries are in Peru this week to kick off the Asia-Pacific Economic Cooperation's (Apec) annual Leaders Week, as government officials in Lima look to grow their partnerships with Asia while staving off potentially disruptive strikes. The summit comes at a fragile time for Peru, where President Dina Boluarte has a historically low presidential approval rate of 4pc and bus drivers and small business owners are demanding protections from a wave of extortion. The event begins today with meetings among senior officials of the 21 member countries and closes on 16 November with the leaders' meetings, the pinnacle Apec event. With the confirmed arrival of Chinese president Xi Jinping later this week, the summit is likely to strengthen ties between Peru and Asia, amid US concerns of China's growing influence in Latin America. US president Joe Biden is also expected to travel to Lima from 14-16 November, according to the White House. He is then slated to go to Manaus and Rio de Janeiro to meet with Brazilian president Luiz Inacio Lula Da Silva. This week is also the scheduled ribbon-cutting of the Chancay megaport, a $1.3bn commercial hub north of Lima that will cut the transport time between Latin America and Asia from 35 days to 25 days. Cosco Shipping, the Chinese state-owned port operating company, owns 60pc of the project and the rest is owned by Peru mining company Volcan. It aims to become the main commercial port in the Pacific for neighboring Brazil and has a 17.8-meter depth, the greatest in Latin America. While the port will be inaugurated on 14 November, Cosco Shipping has said operations are expected to begin in early 2025. Peru's priorities for Apec include trade investments and the energy transition, with a focus on its critical mining sector — and workers' transition to the formal economy in Peru, where the informality rate is about 73pc. These goals extend to the CEO Summit, which is running simultaneously and will host hundreds of business leaders from Asia looking to invest in Peru's energy and mining sectors. Angel Manero, Peru's agriculture minister, said last week the government expects to approve sanitary protocols with China to export nuts, with the potential of expanding to meat imports, according to the official gazette. He added there are talks with China about attracting investments through the creation of Special Economic Zones. Peru last hosted the Apec in 2016. This time, workers in Lima — led by bus drivers' unions — have vowed a three-day strike during Apec to call attention to a string of killings they say are linked to resistance to extortion. Among their main asks is repealing a recent law approved by congress that they say weakens prosecution of organized crime by, among other things, changing its definition to exclude crimes of extortion. Prime Minister Gustavo Adrianzén has repeatedly asked workers not to strike to avoid "a bad show" during the high-level meetings. By Bianca Padró Ocasio Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more