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China turns to lobsters, wine and coal to ‘punish’ Australia

China won’t allow imports of a swathe of Australian commodities from this week. The curbs are a major escalation in Beijing’s pressure campaign following a stand-off with Australia.

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What started as a political spat between Beijing and Canberra has become a one-sided trade war that threatens serious disruption for an expanding number of Australian exporters.

China won’t allow imports of a swathe of Australian commodities and foodstuffs from as early as this week, according to people familiar with the matter. The curbs are a major escalation in Beijing’s pressure campaign following a two-year stand-off over issues from technology to the origins of coronavirus.

China’s blacklist — delivered verbally to commodities traders — includes coal, barley, copper, sugar, timber, wine and lobster. It doesn’t cover materials, like iron ore or natural gas, where import curbs could unduly damage China’s own economy.

“The Chinese warned earlier this year that many of the goods that Australia exports were replaceable,” Richard McGregor, senior fellow at Sydney-based think tank Lowy Institute said by phone. “Now they’re going about replacing them. China seems determined to punish Australia and make it an example to other countries.”

That means pain for global commodities groups hauling coal from huge mines in eastern Australia, or lobster farmers rearing the creatures off the country’s west coast. Winemakers, who’ve enjoyed a booming demand from China’s growing middle-class, may suffer.

Here’s a look at some of the trade routes about to get rattled.

Coal Country

The black stuff used to generate energy or make steel is the chunkiest of China’s targets. Coal accounted for about 9% of all Australia’s earnings from exports to China last year, far behind the biggest contributor iron ore and a few notches below natural gas.

Iron ore is seen as more immune from trade actions because China’s sprawling steel sector needs vast quantities of Australia’s high-quality ore. The remaining products now in China’s crosshairs all fall in the “other” category. Together they might account for about 5% of export revenues if wheat is included, according to Bloomberg analysis of Australian government data.

Wining and Dining

Beijing doesn’t seem concerned about its richer population’s demand for Australian lobster or fine wines. For premium wines, China is Australia’s biggest buyer, spending almost A$1.2 billion ($830 million) in the year through September, according to trade body Wine Australia. That’s about two and a half times bigger than its exports to the U.S.

The industry has been bracing for trouble in its top market since China announced two trade investigations into Australian wine earlier this year. Shares of one Australian producer, Treasury Wine Estates Ltd., dropped as much as 3% on Tuesday, the most since September.

Copper Conundrum

The copper market spotlights the trade mismatch between the two countries. About 55% of Australia’s mined copper exports headed for the Asian nation last year. But Australia made up barely 5% of China’s needs, meaning it shouldn’t be too much of a problem for its smelters to source alternatives.

One Australian copper producer Sandfire Resources Ltd. fell as much as 9%, although the company said it was confident of finding alternative customers if needed. “The ore from Australia might still get shipped to China after blending or in refined form,” Eric Liu, head of trading and research at AKS Resources Ltd. said from Shanghai.

Wooden Result

Though Beijing will halt sugar and wood imports, they aren’t big export earners for Australia in trade with China. The Asian nation banned timber imports from the state of Queensland after finding pests during checks, the customs administration said last week. –Bloomberg


Also read: Xi Jinping says China can no longer rely on previous model of depending on global exports


 

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1 COMMENT

  1. Month of November in 2020 is impacting trade and economy of Australia in a particular way.

    Readers are here referred to this Vedic astrology writer’s one of predictions for Australia in article -“ Reading planetary impacts for Australia in coming year 2021” – published at nirpakhawaaz.com on 21 October , 2020. Through the said article , this writer has covered Australia for last two months of the year 2020 from November to December plus year 2021 in full. The related prediction reads as follows in the article :-
    “ ( 2 ). During November-December in 2020 , Australia seems to be battling with economic issues facing the country. Some factors behind the curtain impacting economy look to be there. Sea and sea-wealth like oil-gas or fish and such like stuff can engage the attention. Political issues appear to be surfacing and may elude easy solution. In short , Australia is likely to invest or take decision to invest in one or more sectors like energy , agriculture , defense related enterprises outside the country during period of two months”.
    It may be observed that prediction of 21 October 2020 referred to here has two parts as follows :-
    ( A ). “ During November-December in 2020 , Australia seems to be battling with economic issues facing the country. Some factors behind the curtain impacting economy look to be there. Sea and sea-wealth like oil-gas or fish and such like stuff can engage the attention. Political issues appear to be surfacing and may elude easy solution”.
    ( B ). “ In short , Australia is likely to invest or take decision to invest in one or more sectors like energy , agriculture , defense related enterprises outside the country during period of two months”.
    In relation to part ( A ) of the prediction , it may be apt to share with readers a news report – “ Cases of wine piling up in Australia as China shuns imports” – published at businesstimes.com.sg on 18 November , 2020 , which reads as follows :-
    “ Already on edge after China announced two trade probes into country’s wine industry this year , people familiar with the situation said this month Beijing had also ordered traders to stop purchasing at least seven categories of Australian commodities – including wine , rock lobsters , barley and copper ore – in its most sweeping move against Canberra yet”. Here , it may be observed that wine of Australia is known to be a paying market across many parts of world including China. Stoppage of buying this product from buying in November , 2020 , Australia looks to be having potential to sustain substantial revenue loss. And when this writer had said “ fish or such like stuff can engage attention” , it implies eatables or drinkables like wine as well. So in this light the predictive alert of this writer for Australia made by this writer on 21 October , 2020 brought out at ( A ) here can be said to have come closer to facts on the ground meaningfully.
    The second part of 21 October prediction of this writer brought out at ( B ) here was confirmed accurate as also meaningful in the news of signing of world’s biggest trade pact on 15 November , 2020 by 10 countries from Southeast Asia as well as South Korea , China , Japan , Australia and NewZealand.
    After 8 long years of negotiations , the RCEP signed on 15 November , 2020, world’s largest trade pact. The pact is expected to boost up trade between the countries party to the trade , increasing economic activity. The government of Australia is reported to have said on signing the pact on 15 November 2020 :- “ Australian farmers and businesses will benefit from export opportunities under the RCEP pact. There are greater investment certainties for companies and gains for Australian providers within financial services , education , health and engineering sectors”.
    Link to reach the article relating to Australia :-
    http://www.nirpakhawaaz.in/reading-planetary-impacts-for-australia-in-coming-year-2021/

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