Headline watch:

In the last two weeks, the stand-off between China and Australia has become more serious and is hurting commodity exporters. China has banned as many as 7 commodities that contribute to it being one of the largest importers of Australian products. According to Australia’s Department of Foreign Affairs and Trade (DFAT), one-third of Australian exports end up in China – making the most critical trading partner. Key exports to China come from the mining sector but also other key commodities. The current trade dispute has affected commodities like barley, sugar, red wine, timber, coal, lobster, copper and coal. This was confirmed on 14 October when BHP officially announced that Chinese customers had begun asking for deferrals as the government in China ordered a ban on Australian coal. 

Escalating trade dispute between China and Australia hurting commodities
Container terminal area in Yangshan Port of Shengsi

Here are the 4 most relevant developments that have taken place since:

China’s $6 billion trade stoush: Fears wheat is next Australian target

This was reported by Eryk Bagshaw and Darren Gray for The Sydney Morning Herald. Key points from the report were:

  • China’s Ministry of Foreign Affairs has not confirmed customs agents have delivered instructions verbally to halt Australian imports
  • “The reduction in imports of the relevant Australian products is the companies’ own actions,” it (China’s Ministry of Foreign) said in a statement
  • More than 20 tonnes of Australian lobster remains stuck on the tarmac at a Shanghai airport and Queensland timber has been blocked over pest control concerns
  • Foreign Minister Marise Payne said on Wednesday that she expected trade with China to be consistent with WTO obligations. “We are continuing to seek clarity from Chinese authorities,” she said.
  • Trade Minister Simon Birmingham said “We’ve raised real concerns with China about this move and it is part of a number of moves that we’ve seen, that do present a higher risk, higher concern environment in terms of Australian businesses trading with China,”

Read full report here.

China-Australia trade: Beijing set to ban nearly US$400 million worth of Australian wheat imports

This story was reported by Bonnie Au in the South China Morning Post. Key points from the report:

  • Wheat exported from Australia is expected to join a list of goods banned by China
  • Beijing’s latest actions came as tensions between the two nations escalated since April when Canberra pushed for an international inquiry into the origins of the coronavirus
  • Starting from November 6, 2020, the items will be barred from China even if the goods were already paid for and delivered to Chinese ports

Read full report here.

China push for retrospective wine tariffs puts heat on Treasury Wines

While mining suffers from the ban, so do other commodities. The Australian Financial Review report by Simon EvansPeter Ker and Angela Macdonald-Smith said the following:

  • The fallout from the China trade war reverberates with a push by a Chinese entity to have the Chinese Government impose retrospective tariffs on Australian wine imports
  • Treasury (Treasury Wine Estate, an Australian global winemaking and distribution company) is in the spotlight because it produces more than 40 per cent of Australia’s $1.26 billion in annual wine exports to that country

Read full report here.

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