China coal ban hits Orica

Explosive maker cuts ammonium nitrate supply

EXPLOSIVES manufacturer Orica has been forced to slash supplies of ammonium nitrate to Australian coal miners as China’s import ban continues to roil the industry and stokes fears of mine closures.

China’s black-listing of Australian coal may force Queensland and NSW producers to shut mines. Beijing’s move has crippled revenues for the nation’s second-biggest export industry.

“We are very concerned that all Australian exports of thermal and metallurgical coal to China are currently stopped,” Orica chief executive Alberto Calderon said at the company’s annual general meeting on Tuesday.

“We hope that the government can quickly re-establish constructive dialogue, build understanding of the issues on both sides and begin the process of normalising relations.”

The bulk of Australia’s mines depend on Orica to keep their production running through its supply of bulk explosives and detonator systems and Mr Calderon said the company had already suffered from the ban.

“At this stage, for the next month we are anticipating about a 10,000-tonne impact on the east coast of ammonium nitrate demand per month,” he said.

“So every month that it’s not sold, it’s going to be about 10,000 tonnes. So that’s why we are urging the government to do what it can to normalise this situation.”

China’s coal ban has cut more than 7 per cent of Orica’s monthly ammonium nitrate volumes for the Australia, Pacific and Asia regions based on its production in 2020 of 1.68m tonnes.

Australia’s official commodity forecaster estimates China’s decision to impose sanctions will spark a $17bn collapse in 2020-21 coal export revenues, spoiling record revenues for the federal government from booming iron ore prices.

Orica chairman Malcolm

Broomhead, also a director of mining giant BHP, said it was tough to forecast how the coal standoff would be resolved.

“We’ve seen impacts continue into the start of this financial year and, given the constantly evolving situation, it’s difficult to predict at this point the extent of that impact,” he said. “But we’re continuing to closely monitor the situation and are regularly maintaining communication with our customers.”

BHP, which sells 30 per cent of its Australia-mined coal to China, is likely to be a loser from China’s ban on Australian coal, with the ongoing rift triggering profound shifts in global commodity trading, according to UBS.

Mr Broomhead said he hoped the incoming US administration would reset Washington‘s relationship with China, allowing Australia to mend its own rift.

He hoped it would “act as a circuit breaker and lead to a rebalancing of international relations, particularly with China, that Australia can then leverage”.