China’s $1.5 Billion Indonesia Coal Deal May Hit Australia

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China agreed to buy about $1.5 billion of coal from Indonesia after striking a new three-year supply pact, a move that has the potential to further weaken trade ties with rival supplier Australia.

Indonesia will seek to raise coal exports to China from 2021 and aims to attract investment in the development of processing technology, according to the Indonesian Coal Mining Association, which on Wednesday signed a memorandum of understanding with the China Coal Transportation and Distribution Association.

Chinese firms signed contracts to buy about 28.7 million tons of coal under the deal, China’s embassy in Indonesia said Friday in a statement posted on its WeChat account. The value of Indonesia’s coal exports to China fell to $4.9 billion between January and September on weaker demand, from $5.8 billion in the same period in 2019, according to the statement.

China’s $1.5 Billion Indonesia Coal Deal May Hit Australia

The deal comes as relations between China and Australia deteriorate. China has blacklisted a range of Australian commodities as a diplomatic spat between Beijing and Canberra worsens. Tensions between the two trading partners have intensified since Huawei Technologies Co. was barred from building Australia’s 5G network in 2018.

Chinese power stations and steel mills were told to stop using Australian coal and ports were instructed not to offload the fuel, Bloomberg News reported in October.

In another move that will unnerve Australian exporters, China will impose anti-dumping duties of more than 100% on Australian wine from this weekend, the latest sign of deteriorating trade tensions between the two nations.

©2020 Bloomberg L.P.

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