08 September 2015
by Angus Grigg

China defies Abbott showing "coal not good for humanity"

Prime Minister Tony Abbott may believe coal is "good for humanity", but China is taking the opposite view.

Official figures released on Tuesday showed the volume of coal imports fell 31.3 per cent over the first eight months of the year, as China's overall trade for August decline more than expected.

China's historical decline in coal imports and usage is being partly driven by the slowing economy, but equally by a switch to cleaner fuels.

The same official figures, from the Customs Bureau, show China's imports of liquefied natural gas (LNG) were up 14.8 per cent in volume over the first eight months of the year. This suggests China's is moving away from coal and towards gas at a time when plunging oil prices make such a decision far cheaper.

China's overall coal consumption was down 5 per cent in the first five months of the year. Australian LNG producers look to be benefiting from China's switch, even if they are being forced to accept lower prices.

A separate report from the Customs Bureau, released late last month, shows China bought 4.28 billion yuan ($966 million) worth of LNG from Australia over the first six months of the year.

While still small compared to iron ore and coal the value of Australian LNG exports to China rose 125 per cent over the first half, even as oil prices collapsed.

The other big growth area is agriculture. The value of Australian wheat exports to China was up 45 per cent over the first six months of the year, while wool was up 10 per cent.

That ranked wheat third behind coal and iron in terms of exports to China, with wool a very close fourth.

While these gains in LNG, wool and wheat will not make up for lost federal government revenue from coal and iron ore exports, they do demonstrate the transition which is underway in China.

The data shows the world's second biggest economy is demanding more food and clean fuel from the world, but less coal and cars, while iron ore volumes are broadly flat.

For the fist eight months of the year, China's cereal crop imports were up 85 per cent, while car imports were down 26 per cent.

China's overall iron ore imports stood at 74 million tonnes in August, almost identical to the same time last year, but 7 per cent more than the same month in 2013.

This paints a mixed picture of China coming into the fourth quarter, as its overall trade position worsened again in August, as both exports and imports declined more than expected.

China's imports fell 14.3 per cent last month compared to a year earlier, while exports were down 6.1 per cent over the same period. China's overall trade in August was down 9.7 per cent.

The value of China's trade with Australia fell by 18.6 per cent for the first eight months of the year, reflection the big falls in the price of coal and iron ore.

Both the August export and import numbers were far worse than the market had expected and came after big declines in July.

The worse than expected numbers for August are likely to raise fresh doubts about the health of China's economy, which is already struggling to meet its annual growth target of 7 per cent.

China has cut interest rates five times since November last year in response to the weak economy and the government has said it would do more to support growth.