China’s new Australia ban: From bad to worse for metallurgical coals?

China's ban on Australian coal gained some more teeth last week, as authorities declared a moratorium on coal ships arriving after November 6th. The move ignited fresh turmoil in metallurgical coal markets as Chinese buyers pulled back from scheduled Q4 shipments. FOB prices have held their ground but delivered prices to China have skyrocketed as buyers scramble to replace Australian high quality coking coals. The latest move looks likely to see the existing backlog of imported coals slowly cleared, but new shipments may have to wait until the lunar new year in February. China's coal buyers are not isolated from the impact of the moratorium and, ultimately, we expect the Chinese market to reopen to Australian coals. And when the moratorium ends, the huge arbitrage that has opened up for metallurgical coals could see prices rise rapidly.