Australian coal was being used as a tap to be turned on by Chinese steel mills and power stations when convenient according to one resource analyst.
The miner’s union says ships at anchor in the South China Sea are holding Australian coal worth between AUD500 million and AUD700 million.
There could be as many as 70 ships that have been held at bay for months on false quality concerns said CFMEU mining division Queensland state secretary, Steve Smythe.
The ships were a floating reserve for Chinese steel mills and power stations said Fat Prophets Resource Analyst David Lennox.
“Certainly, a quality reserve,” said Mr Lennox. “They know Australia can’t find homes for that amount of coal regularly at this stage. Certainly, from our point of view, that’s probably what they are doing.”
“If they need to call on coal at some point in the future and their own resources are below quality when it comes to the pollution mark they set, then they could easily call on coal in the South China Sea.
“When you’re that big a consumer and have that big a resource as well, you can have a say in what happens in the pricing into your country which is, I guess, what they’re doing at the moment.”
There needed to be a diplomatic solution said Mr Smythe.
“It’s interesting to note that they’re saying they don’t want the coal, yet they don’t want to let the ships go either,” he said. “As I understand it, until the coal is clearly on the dock, or been taken off the ship, there’s no transfer of money.”
“They’re saying they don’t want our coal and there’s all these excuses around the quality of it and everything else, which is really a joke, we have the best quality coal, versus, they’re going to take coal from Indonesia and elsewhere and obviously, the quality is poorer.
“Certainly, having those ships sitting off that port is no good for our economy and for the mine workers who work in these mines and their families, because they’re the ones that cop it if it goes astray and doesn’t get fixed.”
Stockhead reports that the Chinese steel mills are currently paying twice as much for US coking coal, or a US$100/tonne premium.
“Recent deals in the seaborne market for coking coal show Chinese buyers are picking up cargoes of Canadian and US coking coal for prices of around $US200 to $US210 per tonne on a delivered-China price basis,” Stockhead reported.