Australia-China row prompts shift in coal trading, as hope emerges for stranded seafarers

Australia-China row prompts shift in coal trading, as hope emerges for stranded seafarers
John Basquil/ 17-02-21 / https://www.gtreview.com/news/asia/australia-china-row-prompts-shift-in-...

China’s unofficial ban on Australian coal imports is resulting in shifting trade flows across the region’s energy sector, mining companies believe, as hope emerges for ship crews stranded at sea for months on end.

Introduced as part of a trade dispute between the two nations, China’s import restrictions made headlines after dozens of ships carrying coal from Australia were left stuck at sea for weeks or months, unable to offload cargo or change crew. The ban has never been officially confirmed by Chinese authorities.

Early signs are now emerging that the worst of the crisis could be over. Seafarers aboard several vessels – including Anastasia, whose crew recently reported an urgent need for medical attention – have been allowed to return home, as industry groups call for further action from shipping companies.

Australian coal exporters have this week told investors the future of this trade corridor remains highly uncertain, but that they are starting to find new export markets elsewhere in the Asia Pacific region.

Mining giant BHP acknowledges in its half-year financial results up to December 2020 that “uncertainty about China’s import policy towards Australian coals spiked” during that period, and that the industry “faces a difficult and uncertain period ahead”.

The company says it has written down the value of its coal assets by US$1.6bn, in part due to current market conditions and that China’s restrictions remain a key uncertainty. Chief executive Mike Henry told investors he is “certainly not banking on any near term resetting of that policy”.

However, BHP says demand for coal from outside China grew in late 2020, and adds: “Trade flows are adjusting to account for the available opportunities.”

Independent producer Whitehaven Coal, which does not export directly to China, also tells investors it has noticed an impact on the seaborne coal market.

“China’s restrictions have altered seaborne coal trade flows where, instead of being delivered to China, Australian coal is now finding customers in alternate destinations including India, Pakistan and the Middle East, and traded coal historically delivered into these markets is finding its way into China,” it says in its half-year results.

According to a paper by Fitch Ratings last month, coal exporters in Indonesia appeared to be the initial beneficiaries of fresh Chinese imports. It says that by January, the country’s coal index had risen by 73%, to US$45 per tonne, compared to the seven-month average up to November 2020.

The Australian Bureau of Statistics also says coal exports to South Korea, India and Japan increased by 48%, 38% and 27% respectively in December. That has “offset some of the fall” caused by a drop in exports to China, it says.

Relief for stranded seafarers

At the same time, hope is emerging for seafarers aboard the dozens of vessels carrying Australian coal that have been unable to offload at Chinese ports.

GTR reported earlier this month that MSC Shipmanagement – operator of Anastasia, which had spent nearly 21 continuous months at sea – remained in talks with authorities in China and India over facilitating a crew change, but had so far been unsuccessful.

Since then, however, MSC has agreed to pay a hefty charge in order to release the ship’s cargo and allow its staff to return home, industry groups say.

“MSC has led the way by paying the necessary costs and penalties to charterers and cargo owners in order to rescue the crew of their ship, the Anastasia, and see them rescued from their six-month floating prison via a port in Japan,” says Paddy Crumlin, president of the International Transport Workers’ Federation (ITF).

“We call on all responsible ship owners to follow MSC’s lead and perform these long-overdue crew changes. It will be costly for these shipping companies, but it is absolutely necessary to preserve the health, lives and human rights of these seafarers.”

The ITF statement acknowledges that resolving such situations is “expensive”, but says it is “the right thing to do”.

In a statement issued on February 9, MSC did not mention the financial aspect but described a complicated arrangement whereby the vessel had been sub-chartered to a third party.

“The commercial parties involved in the selling and buying of the cargo onboard were caught in the ensuing political uncertainty around the trade issue,” it said.

Seven other vessels have also reportedly been approved to discharge cargoes in China, though analysts are not seeing the decision as an indication that the country is relaxing import restrictions.

Despite these positive signs, the ITF’s Crumlin points out that a long-term solution is still required for the dozens of other vessels still stranded.

The crew of Christine Oldendorff, for example, has been anchored outside Caofeidian port since August last year. Its 20-person crew has been on board for a year and a half, and are “desperate to get home to their families”, the federation says.