Published: Sun, February 24, 2019
Markets | By Erika Turner

Aussie dollar tumbles as China's Dalian port bans Australian coal imports

Aussie dollar tumbles as China's Dalian port bans Australian coal imports

S. dollar following news about a ban on Australian coal by a major Chinese port.

The Dalian Port Group announced through Reuters that it was banning coal imports from Australia, and also introducing a total cap on coal imports at 12 million tons for 2019.

Australia's Trade Minister Simon Birmingham said Friday, Feb. 22, 2019, that while there might be some delays in the processing of coal shipments at Chinese ports, he has no reason to believe China is banning Australian coal. They have commitments as a World Trade Organisation member and we are an important trading partner to each other and we want this relationship to be smooth and ongoing.

He said the relationship with China was in good shape.

In offshore markets, the yuan rose 0.4 percent to as strong as 6.7195, its best level since February 1. China's biggest traded mining company, China Shenhua Energy Co Ltd, rose more than 4%.

China's Foreign Ministry Spokesperson, Geng Shuang, has said the decision is related to "environmental protection" and the government "conducting risk analysis". The possibility of adverse impacts on China suggest a long-term ban is unlikely. Prices would have fallen if there was a ban in place, according to Daniel Hynes, an analyst at Australia & New Zealand Banking Group. To oversee the end of Australian exceptionalism would be unforgivable.

Australia banned Huawei in August previous year, recently revoked the permanent residency of a Chinese billionaire over concerns that he's an agent of influence and is pressing the Chinese for access to Australian citizens and permanent residents held in prison or trapped in Xinjiang.

However, Australian coal, which accounts for more than half of the port's 18 million tonnes of imports each year, was taking longer to clear customs, he said, adding that official policy on product from Australian was "very fuzzy". "They could do more if they wanted to, but if they did they would shoot themselves in the foot because if they stop buying our raw materials, they will suffer as well".

While the local officials acted on the order in various ways, the general effect was to extend clearance for Australian coal to more than 40 days.

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China was the second-biggest customer of Australia's coal a year ago, accounting for about 23 per cent of total exports, according to Australian government data.

"Those knee-jerk headlines of "Australia's number-one export destination has a ban on Australia's number-one export" were enough to knock the Aussie lower", Callow said.

"I would not jump to the conclusion that it is something directed towards Australia". The minutes were generally in-line with expectations, showing a strong USA labor market and a stable economy, which could support an interest rate hike.

The Australian dollar took a fall on Thursday, after already being on the back foot due to weak Westpac forecasts announced earlier on Thursday.

Glasenberg didn't highlight any specific political issues between the countries.

"At the moment, nobody except Beijing really knows", he said.

Mr Fletcher said Australia was aware that other countries were also experiencing "some difficulties" with their exports, but did not specify which ones.

"It's a bit hard to know whether it's meaningful or not".

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