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Australia finds new markets for coal and barley during China’s trade war

A bucket wheel reclaimer standing next to a pile of coal at the Newcastle Coal Port in Newcastle, New South Wales, Australia, October 12, 2020.

David Gray | Bloomberg | Getty Images

According to analysts, China’s restrictions on Australia’s exports are not as harmful as Australia initially thought it would find a new market for its goods.

Tensions between the two countries have increased in recent months and have exacerbated sharply after Australia supported China’s call for a global investigation into its response to Covid-19.

Beijing has since taken several steps to limit Australia’s imports, ranging from tariffs to imposing other bans and restrictions.This has Shipping Barley, wine, beef, cotton, coal, etc.

According to the Australia-based Lowy Institute, the total export value for 2019 was about $ 25 billion, or 1.3% of Australia’s gross domestic product.

China is Australia’s largest trading partner, and analysts expected Australia to be severely hit by restrictions.

However, they now say that Australia has managed to curb the damage by diverting much of its exports to other countries.

Australian coal exporters appear to be quite successful in diverting to other markets.

Roland Raja

Chief Economist at the Lowi Institute

“In areas affected by sanctions, exports to China have collapsed as expected, but most of this lost trade seems to have found other markets,” said Roy Institute’s chief economist. Roland Raja said.

Overall, affected Australia’s exports to China were stable at just over $ 9 billion throughout most of 2020, with the exception of coal. Ultimately, as restrictions escalated in late 2020. He added that it was reduced to about half of that.

Following regulation, these same commodities found other export markets, with trade in those commodities increasing by about $ 4.2 billion annually, offsetting most of the losses from China, Rajah said.

Prosperous sector: coal, wood, seafood

Coal is one of the prosperous commodities despite China’s ban.

“Australian coal exporters seem to be quite successful in diverting to other markets,” Rajah said in a recent note. “China is the first most common export to other markets. Initially increased due to a reduction in coal imports from around mid-year, then this trend accelerated as China targeted Australian coal in October 2020. “

By January 2021, Australia’s coal exports to the rest of the world had increased by $ 9.5 billion annually from before the ban, he said.

In particular, Australian coal in India has gained market share, according to Rajah.

Marcel Thierry Henry, senior economist from Australia and New Zealand, also agreed.

Australia’s exports of non-ferrous ore to China have fallen by 40% over the past year, but “coal miners have been able to bypass shipments to other countries,” he said. “The bottom line is that the conflict isn’t as damaging to the Australian economy as many think.”

We are constantly looking at other opportunities that we can pursue, either through our existing trading partners or by opening new paths that we can explore.

Dan Taehan

Australian Trade Minister

It’s not just coal. Other Australian exports affected by these restrictions show “more clear signs of a significant trade shift,” Raja said.

He listed barley, cotton, seafood, and wood that could find new markets.

“Sales of these products to other markets have surged, after China’s sanctions were tightened in late 2020.

Striking sector: beef, wine

However, analysts point out that Australia is struggling to ship beef and wine.

“The Australian wine industry is struggling to make up for the losses in the premium Chinese market,” said Rajah. Earlier this year, China claimed that Australia was dumping and subsidizing wine exports and imposed anti-dumping tariffs on some Australian wines, resulting in a blow to China’s domestic wine sector. Was.

Read more about China from CNBC Pro

Beef was also hit when China stopped importing from some Australian beef suppliers.

However, Raja and Thielyanto said the slowdown in exports was not solely due to trade tensions with China, and that supply problems after the recent drought could also have a significant impact.

“It’s also impressive that copper exports haven’t increased much, even though copper prices have risen one-third above pre-virus levels,” Tiland told CNBC. “This also suggests that Australia had a hard time transporting copper elsewhere.”

But Australia isn’t sitting down. The company is looking for new markets as it shows no signs of weakening tensions with China.

Deputy Prime Minister Michael McCormack told CNBC in May that the country is aiming to diversify its market.

As an example, he said Australia had just sent the first shipment of barley to Mexico.

Last year, the Chinese government imposed anti-dumping and anti-subsidy tariffs on Australian barley. This is a measure that effectively keeps the country’s barley producers out of the Chinese market.

Last week, Australia’s trade minister said he would request the World Trade Organization to establish a dispute resolution panel to resolve concerns about such restrictions imposed by China on Australian barley.

Australian Trade Minister Dan Tehan told CNBC Wednesday He said his country is also considering whether to involve the WTO in the ongoing wine dispute with China.

Tehan reiterated the message that Australia is looking at ways to find new markets for its products. We are currently negotiating a free trade agreement with the United States. England And that European Union..

“We are constantly looking at other opportunities that we can pursue, either through our existing trading partners or by paving the way for new paths,” he added.

Australia finds new markets for coal and barley during China’s trade war

Source link Australia finds new markets for coal and barley during China’s trade war

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