There is a reorientation of some of the commodity trade flows in Asia-Pacific following the restrictions imposed by China on the imports from Australia.
Chinese coal import volumes from Indonesia soared to new record levels in December at the same time as Australian imports fell to virtually zero, from around ten million tonnes in June.
While the Indonesian coal exports to China reached new highs, volumes to the country’s traditional main customer, India, declined considerably.
Between April and December last year, the monthly volumes imported from Indonesia fell by five million tonnes and almost halved. The reduction has allowed Australia to become the top supplier to India, on the back of strong growth in the coal trade between the two countries.
While it may appear as the two nations have swapped markets, it is not quite as straightforward as that, with the thermal coal exported from Indonesia having a lesser energy value than its Australian counterpart.
The Indonesian coal is also trading at a discount to Australian coal, due to the lower quality, but has recorded stronger gains compared to the Australian Newcastle index since their lows in September last year on the back of rising Chinese demand.
A large part of Australia’s rising exports to India is also coking coal rather than thermal coal, which China now must source at more distant shores.
Source: Breakwave Advisors