China's `Friendly' Neighbors Seize Coal Share From Australia

(Bloomberg) -- China’s move to stifle coal imports from Australia is hurting its No. 2 supplier, with shipment figures showing the exporter conceding share in the world’s largest market.

Cargoes from Australia accounted for 18 percent of China’s overseas purchases in March, near the lowest since 2012, according to customs data and Bloomberg calculations. Meanwhile, Russia and Mongolia steadily built their share in the past few months as customs delay hobbled their rival. Top shipper Indonesia maintained its stake at about 50 percent.

“Importers tend to favor supplies from countries that have a friendly relationship with China such as Russia and Mongolia, and avoid purchases from nations that have trade frictions,” said Zeng Hao, an analyst at Fenwei Energy Information Services Co. “There isn’t anything particular about Australian coal that Mongolian and Russian supplies can’t replace.”

China has a history of using trade to help achieve its foreign policy goals and the slowdown of Australian coal since end-January has spurred concern it’s retaliating against a ban on Chinese tech giant Huawei Technologies Co. The increased scrutiny, including checks for radioactive content, will likely remain until Beijing assesses government policy in Canberra after federal elections in May.

That is benefiting Mongolia and Russia at this stage. The North Asian nation supplied 15 percent of the coal China imported in March. Russian purchases made up 13 percent, the highest in data going back to 2011.

Smoothing out monthly fluctuations shows a less pronounced shift in China’s purchasing habits over the first quarter, as Australia got a boost in January when China eased prior import curbs. The exporter’s share was 25 percent in the first three months from 27 percent in the same period last year. Mongolia and Russia each accounted for 10 percent, while Indonesia continued to make up half of inbound coal cargoes in China.

To contact Bloomberg News staff for this story: Ben Sharples in Hong Kong at bsharples@bloomberg.net;Jing Yang in Shanghai at jyang251@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Jasmine Ng, Jason Rogers

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With assistance from Bloomberg