Why ASX-listed coal stocks plunged on Tuesday

After the markets closed on Monday, December 15, news began to circulate that Beijing had officially blocked Australian coal imports.

This unofficial news comes as ships filled with some $700 million worth of Australian coal had been stranded off the coast of China over the previous few months, with the Chinese government saying that this was due to quality issues, according to the ABC.

For reference, in 2018-19, Australia exported some $14 billion worth of coal to China.

Why block coal imports at all?

Trade tensions have continued to escalate between China and Australia over the last few months. In addition to those stranded ships, China most recently slapped duties of between 107.1% to 212% on Australian wine imports.

The revelation that Beijing had officially banned Australian coal imports marks an escalation of these issues.

This speculation, which was not formally announced, appears to have been confirmed by the Chinese tabloid – the Global Times – which overnight ran a story titled: China extends full open gesture to imported coal except for Australia.

Here, Wang Yongzhong, Director of the Institute of Energy Economy, in speaking to the Global Times, said:

‘Since Mongolia has a geographic advantage that allows lower transportation costs than any other exporters, it could take a large share from Australian coal, as the relationship between China and Australia has been deteriorating and Australia is gradually losing the Chinese market. Domestic suppliers can also grab some market share’

Adding further colour to the reasons behind this block, Wang Yongzhong said:

‘China planned to reduce 100 million tons of coal consumption annually by 2030 to finally accomplish its carbon-neutral goal before 2060, which means fading demand in the coal market. An absence of Australian coal in China is actually beneficial to all other market suppliers,'

The Australian government was blindsided by this news, with Trade Minister Simon Birmingham saying he was ‘deeply troubled’ by the reports of the coal ban.

As Tuesday progressed, Mr Birmingham is reported to have said:

‘It is certainly unacceptable to see a circumstance where governments, businesses find out about decisions of other businesses or other governments, purely via media outlets.’

New Hope Corporation, Yancoal Australia and Whitehaven Coal share prices fall

While the ASX traded modestly lower on Tuesday, ASX-listed coal stocks, including Whitehaven Coal (WHC), Yancoal Australia (YAL), and Yancoal Australia (NHC) all saw their share prices plunge in response to the news of the import ban.

A little before noon, Whitehaven Coal was down 7.00% to $1.50 per share, New Hope Corporation had dropped 9.90% to $1.32 per share, while Yancoal was down a substantial 9.64% at $2.25 per share.

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