AUSTRALIA's diplomatic relations with China were hardening before the coronavirus crisis, but the emergence of COVID-19 - and the focus it has put on China's relations with the rest of the world - means the relationship may be re-examined from both sides once the urgency of the pandemic is behind us.
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As we are exploring in a series of articles, the Hunter economy is enmeshed with China's in a number of ways, and one of the most financially sizeable of these engagements is through the coal industry, where China is a major investor in mines and the port.
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China is also Newcastle's second biggest coal customer, buying almost a fifth of the coal shipped through the port.
One of the most high profile Chinese investments in NSW came in 2014 when a 50/50 consortium of Australian investment funds and China's biggest ports operator, China Merchants Ports, paid $1.75 billion to lease the Port of Newcastle for 98 years.
China's mine investments are through a company called Yancoal Australia, majority owned by a Chinese-based company Yanzhou, which is in turn controlled by a state-owned enterprise, Yankuang Group.
It bought its first Australian mine, Austar (formerly Pelton/Ellalong) near Cessnock, in 2004, and has grown to be a substantial player in Queensland and one of the big two in NSW, alongside the Swiss-based Glencore.
As well as owning the Donaldson, Ashton and Moolarben mines exporting from Newcastle, it bought Hunter Valley and Mount Thorley/Warkworth from Rio Tinto in 2018 and is believed to be the front-runner to buy Muswellbrook's giant Mount Arthur mine from BHP.
Although nothing has been confirmed, there is speculation this transaction may be struggling to get Foreign Investment Review Board approval, especially after tightened rules were announced by the federal government on March 29.
Yancoal has shareholdings in the port's two coal loader companies.
It is the largest and managing shareholder in Port Waratah Coal Services (PWCS), which runs terminals at Carrington and Kooragang Island. It would become the largest shareholder at the Newcastle Coal Infrastructure Group loader on Kooragang if it bought BHP's share as part of a Mount Arthur takeover.
Despite the understandable public questioning that comes with any form of foreign investment - and every nation has its version of Australia's fears about "selling the farm" - the easy answer to such doubts is that no matter who "owns" a particular asset, "they can't take it with them".
The Northern Territory's 2015 lease of Port Darwin to a Chinese company has drawn widespread criticism on security grounds, but the Newcastle deal has not been so closely examined, at least not publicly.
The port's Australian management is adamant they have been left to manage the business as they see fit by their Chinese shareholders, and if Newcastle does get permission to build its long-awaited container terminal, Chinese funding would likely contribute some, if not all of the costs.
All nations need trade to survive, and Australia has been an exporting country since colonial days, with shipments of Newcastle coal and cedar among our earliest products.
Japan was Australia's first major customer for coal when the modern export era began after WWII, and it remains that way today.
For a long time, our next two biggest coal customers were South Korea and Taiwan, but China began substantially increasing its imports of Australian coal from 2009, as shown by long-time records kept by the Australian Bureau of Statistics.
In its 2019 annual report, PWCS had 47 per cent of its product going to Japan, followed by China with 18 per cent, Taiwan with 15 per cent and South Korea with 12 per cent.
About 85 per cent of the coal shipped through Newcastle is thermal or steaming coal, burned to boil water to turn steam turbines to generate electricity.
The best 15 per cent is a metallurgical or coking coal used in steel making. Usually classed as "semi-soft" coking coal, it is generally cheaper than the "hard" coking coal mined in Queensland.
Coking coal and thermal coal are separate markets, and coking coal regularly sells for about double the price of thermal coal.
A snapshot of the market can be seen in the ABS figures illustrated on this page, but prices have fallen steeply since the most recent statistics, up to March 31.
It is true that the prices for one-off or "spot" cargoes of thermal coal out of Newcastle have fallen substantially during April and May.
But from January until mid-April, better quality cargoes (6000 kilocalorie, a measure of energy) were selling at above $61 a tonne (about $93 at recent exchange rates) while 5500 kilocalorie coal was bringing as much as $US55 ($84).
Prices have since slipped to $US49 ($75) and $US39 ($60) respectively, which are around the levels they were during a previous slump in 2016, which had the anti-coal lobby calling it a permanent decline.
Prices quickly bounced back, as they are likely to this time, given that the present slump is related to directly to the global coronavirus lockdowns, which have temporarily reduced the need for steel and electricity use by industry, at a time when Australian coal production has been largely unaffected.
Despite China's increased appetite for Australian coal - along with our iron ore from Western Australia and South Australia - the country has a massive domestic coal industry that dwarfs that of any other nation.
This allows it to regard Australia as a "swing producer", which means it can turn to us when international prices for coal are low, and then swing back towards more domestic production when prices are high.
These movements are rarely telegraphed, although a report this week from China's Xinhau.net news agency shows how the situation is viewed domestically.
In an article on thermal coal prices in China's main northern ports, Xinhau said: "In April, China imported 30.95 million tonnes of coal, a year-on-year increase of 22.3 per cent.
"It indicated that imported coal still plays a strong role as a replacement."
"The unexpected increase in imported coal and the downward trend in coal prices in some areas have, to some extent, curbed the rebound in coal prices."
Part II of this report on China and the Hunter coal industry will be published on Tuesday.
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