Logistics, Ports & Terminals, Mining and Heavy Industries

Chinese testing against free trade, BHP says

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Just days after Australia gave bi-partisan support for the China Australia Free Trade Agreement, Australia’s biggest met coal exporter says Chinese coal testing is running counter to the promising free trade narrative.

Speaking this week with Fairfax, BHP Billiton vice-president of coal marketing Shaun Verner labelled China’s regime of testing for imported coal a “significant impost” on free trade.

Verner said BHP was yet to have a cargo rejected.

But he said the company’s competitors, in some cases, were being forced to sell rejected shipments at a significant discount.

“Our understanding is that where some cargos have been rejected, and we have heard through the market that there have been a few, they have had to be reloaded and resold as distressed cargoes in other markets,” he was quoted as saying.

“If you take the general market situation, and price where it is, the risk of having a cargo rejected is not something that people are willing to bear.”

The declining price of coal in the past 12 months led Australian miners and officials to call on Beijing to suspend its coal-quality testing regime.

China – the world’s biggest coal consumer – is testing coal for various unwanted contaminants as part of its anti-pollution push.

But miners believe the regime is unfairly blocking some cargoes at Chinese ports, increasing both cost and risk for struggling coal mining operations.

“The main problems relate to the variability in the testing regime, inadequate allowance for commercial remedies and the delays it is subjecting shipping to,” Greg Evans, Minerals Council of Australia director of coal, was quoted by the Financial Times in June.

“There is no doubt each of these factors adds to cost and increases risk.

“We would be concerned if the measures did not apply to local producers as this may be contrary to established trade rules.”

Verner agrees it is an issue of fairness.

“It’s all sentiment based,” he reportedly told Fairfax this week. “It’s much more difficult to get your material in … It takes longer, the lead times compared to domestic material are more difficult.

“The risk of having a cargo rejected – there is no dispute resolution mechanism. And a lot of these ports don’t even have re-loading facilities … the risk that the customer bears in this situation is strong.”

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