China is Australia’s biggest trading partner and coal is the resources-rich country’s most valuable export (WILLIAM WEST)

Sydney (AFP) – Canberra on Friday played down reports a major Chinese port had banned coal imports from Australia, as fears grow that worsening diplomatic tensions are damaging the nations’ crucial trading relationship.

Industry experts have noted recently that China appeared to be delaying customs clearances for Australian coking coal used in steel-making, but a report late Thursday that Dalian Ports had specifically banned Australian coal shipments sent the Aussie dollar plunging.

China is Australia’s biggest trading partner and coal is the resources-rich country’s most valuable export.

Australian officials were unable on Friday to confirm the import ban, initially reported by Reuters, and said the country’s ambassador in Beijing was seeking clarification.

Prime Minister Scott Morrison urged observers to be “careful about leaping to conclusions” and said regulatory rather than political issues were at play.

“This is not the first time that on occasion local ports make decisions about these matters,” he told reporters in Auckland, where he is meeting with his New Zealand counterpart Jacinda Ardern.

“And so there is nothing — no evidence before me or us — that would suggest that it has the connotations that it has anything to do with anything more broadly than that.”

There has been speculation about whether the Dalian move is about addressing domestic pressures, or retribution over Canberra’s decision to ban Chinese communications giant Huawei’s 5G equipment over security risks.

Canberra and Beijing have sparred diplomatically in recent months over the 5G ban, China’s growing drive to increase its influence in the Pacific and the expulsion of a Chinese billionaire who donated to local political parties.

– ‘Knee-jerk headlines’ –

Central bank governor Philip Lowe said Friday it would be “concerning” if the diplomatic spats were spilling into the trading arena, but added that it would be prudent to “wait and see” what the motivations behind the Chinese actions were.

Lowe, echoing analysts, said it was also important to note that the current amount of coal reportedly blocked by Dalian was small.

China’s foreign ministry spokesman Geng Shuang said late Thursday that Chinese customs were “conducting risk detection and analysis work on imported coal to ensure their safety and quality”.

“The objective of this is to better protect the legitimate rights and interests of Chinese importers and to protect the environment,” he said.

Coal shipped from Australia to Dalian Ports accounts for about 10 percent of Australia’s exports of the commodity to China, and only two percent of overall exports.

“If that’s all we’re talking about, the blocking of a couple of months of coal exports, then that’s not going to derail the Australian economy,” The Australian quoted Lowe as telling a parliamentary hearing in Sydney.

Westpac senior currency strategist Sean Callow told AFP that while the Australian dollar dropped one percent to 70.90 US cents late Thursday following the initial coal ban reports, the market was calmer early Friday.

“Those knee-jerk headlines of ‘Australia’s number-one export destination has a ban on Australia’s number-one export’ were enough to knock the Aussie lower,” Callow said.

“Some of the nerves have maybe calmed a bit once the details become a bit clearer of the relatively small scale (of the ban).”

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