The synergy of China appearing to restrict the import of Australian coal with the world’s largest coal exporter and commodity trader Glencore capping production to current levels has been heralded by many as a victory for the movement for action on climate change. While significant, these decisions could owe as much to the operation of market forces and geopolitics as to a desire to comply with the Paris climate accords.
Industry experts had noted for some time that major ports in China appeared to be delaying customs clearances for Australian coking coal used in steel-making. However, when an official at China’s Dalian Port Group told Reuters that Customs at the northern port would cap overall coal imports for the year at 12 million tonnes, the Australian dollar fell 1% to $0.7081 overnight.
These reports are impacting on new orders. One Chinese coal trader, who imports about 400,000 tonnes of Australian coal a month, said his company had ceased ordering Australian cargoes “because it is unknown how long the restriction will last.”
The government has sought to play down the impact and requested the Australian Embassy to undertake an urgent investigation.
The apparent ban comes amid simmering tensions between Beijing and Canberra over issues such as cyber security and China’s influence in the Pacific. Australia recently revoked the visa of a prominent Chinese businessman, further straining ties.
Both the Chinese and Australian governments, however have denied any political motive. Asked if the ban was related to bilateral tensions, Geng Shuang, a spokesman at China’s foreign ministry, said reports of a ban in Dalian were "false" and Chinese ports were still “receiving coal import declarations” from Australia.
However, he said, customs have stepped up efforts to analyse and monitor the quality and safety of imported coal in recent years because the product sometimes fails to meet environmental standards. “The goals are to better safeguard the legal rights and interests of Chinese importers and to protect the environment,” he said, adding that the move was “completely normal”.
Behind the ban is the need for China to boost local coal. While Australian thermal coal is at price parity with local coal (or coal from Russia and Indonesia) coking coal used in steel making is cheaper than local coal. China’s thermal coal needs could be met from local coal or imports from Indonesia — yet another nail in the coffin of potential markets for Galilee coal. Any displaced Australian coal would eventually find a market, but there would be an impact on price.
On February 20, Glencore the world’s biggest thermal coal exporter stated that it would cap thermal coal production to the 150 million tonnes a year it currently produces. Glencore CEO Ivan Glasenberg revealed the company had been forced by investors to make public concessions on climate change and coal's role in it. Further, he said the company was pressed to make a commitment to support the Paris Agreement and review its membership of external industry lobbies.
Glencore's coal business is valued at about $US25 billion ($A35 billion). It contributed top-line earnings of $US5.4 billion last year, making it Glencore's biggest single earner.
Last year Glencore spent $2.7 billion to purchase a major shareholding of the former Rio Tinto thermal coal assets, prompted by Rio Tinto’s decision to opt out of coal after shareholder pressure.
Certainly shareholder pressure concerning the contribution of coal emissions to climate change is significant. Producers the size of Glencore, whose mining and commodity trading business includes other minerals significant for the transition to renewables, will be able to maintain profitability while restructuring production.
In a statement, Glencore said: “To deliver a strong investment case to our shareholders, we must invest in assets that will be resilient to regulatory, physical and operational risks related to climate change.”
With its copper, cobalt and nickel businesses, used in electric vehicles and battery storage, Glencore said it was in a strong position to support the move to a lower-carbon economy.
What we may be seeing here is the glimmerings of a “market response” to climate change. But corporations, however responsive to shareholder concerns, are committed to the profits of shareholders and not to democratic production in the interests of the planet and those who inhabit it. Glencore has a track record for attacking workers’ rights, most recently in 2017–18 when it locked out 185 worker for 230 days.
There is no market fix to save the planet. For a just transition to renewables an alliance of workers and local communities is necessary.