China’s Australian coal imports surge, replacing Russia as top supplier, but hi-tech products to be ‘slow burner’

But Russia’s share fell from nearly half to 22 per cent during the same period, as shipments from its northern neighbour fell by 41 per cent to US$1.25 billion.

Relations between China and Australia deteriorated in 2020 when Canberra called for an investigation into the origins of the coronavirus.

But ties have since slowly improved, and Australian Prime Minister Anthony Albanese visited China in November.

Exports of Australian coal, cotton and barley, which were previously under official or unofficial bans, have gradually resumed since last year.

“China and Australia both want to ensure the opening of markets now,” said Wang Yong, a professor at the School of International Studies at Peking University in Beijing.

Australia was once the leading supplier of coal to China, accounting for nearly 60 per cent of its total imports in 2019.

But by 2022, Australia’s market share had dropped to 1.5 per cent, with Russia becoming the top supplier with a 40 per cent share.

Beijing, though, lifted restrictions and resumed coal imports in February last year, and the share of Australian shipments has risen rapidly to 18 per cent.

“Russian coal exports to China primarily rely on railway transportation, which has inherent limitations in capacity compared to sea transportation. Australia’s accessibility via maritime routes allows for larger shipments and smoother logistics,” said Alberto Vettoretti, a managing partner at business management consultancy firm Dezan Shira & Associates, who added Australian coal is often considered of a higher quality and as being more cost effective.

“Businesses may strategically opt for Australian coal to mitigate potential repercussions from Western countries’ sanctions against Russia.”

Purchases of Australian coal also enjoy zero import tariffs under the Regional Comprehensive Economic Partnership, as China and Australia are members of the Asia-Pacific trade pact.

China’s lithium battery shipments to Australia also soared by 90 per cent to 1.76 million units in the first two months of 2024 compared to a year earlier, topping US$95.8 million.

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China’s electric vehicle (EV) exports by volume, though, fell by 9 per cent, with the value also falling by 17 per cent to US$350 million.

But Australia remained the third-largest EV buyer with 6.8 per cent of China’s total shipments by value.

“It’s likely that China will increase exports of hi-tech products like EVs, smartphones, and computers to Australia in the future, but it will be a slow burner,” added Vettoretti.

“Australia is going to keep this balanced, taking into consideration larger potential geopolitical concerns stemming from pressure from its allies and its own political agenda.”

“While we cannot dismiss the possibility that Australia may follow a similar path as the EU and US regarding EVs, several factors come into play,” Vettoretti added.

“First, Australia’s automotive industry is not as robust as that of the EU or the US. The relative size and influence of the Australian market could impact how urgently EV concerns are addressed by the Australian government.

“Under the current situation, Australia may prioritise other issues, such as agriculture products exports.”

China has also increased wine imports from Australia, with the share rebounding to 0.6 per cent in the first two months of the year, but still far from the 37 per cent seen in 2019.

“There’s a massive wine glut [in Australia] at the premium end that even if Chinese markets open up, it’ll take a year or more for exporters to take advantage of it,” said Stuart Orr, a professor and the CEO at the College of Practice Professors in Melbourne.

Overall, China’s imports from Australia fell by 1 per cent in the first two months of 2024 year on year, while exports fell by 7.54 per cent to US$10.8 billion.