Chinese buyers need to act fast to secure guaranteed supplies of Australian coal as a ban on imports is eased, according to a key shipper of the fuel.

Negotiations for new long-term contracts for metallurgical coal — used in steelmaking — are already underway, meaning China’s consumers need to lock in orders before the end of March, or risk missing out because of a lack of supply in the spot market, said Coronado Global Resources Inc. Chief Financial Officer Gerhard Ziems. 

“They have to come now and be part of the negotiation, or they rely on spot tons and then have to fiercely compete,” Ziems said in an interview. “I can’t see a lot of spot being in the market in 2023.”

Already, Chinese buyers are lining up to secure cargoes of thermal and metallurgical coal from Australian producers after authorities signaled plans to end a more than two-year ban on imports. Previously frosty ties between the trading partners are improving, opening up a prospect of further loosening of import curbs. 

Coronado, which has mines in both Australia and the US, expects demand for steelmaking coal in China to rise under efforts to kick-start a sluggish economy by ramping up infrastructure and property projects, Ziems said. While China has expanded domestic coal production to a record, Australian material is still favored by both power generators and steel mills for its higher quality. 

Australia is the world’s top exporter of metallurgical coal and has boosted shipments to India, Japan and South Korea since late 2020 to replace lost custom with China, government data shows.

China’s gradual return to purchasing Australian coal will help support prices, and put pressure on nations which moved in to secure more cargoes, like India, according to Ziems. “Met coal prices won’t retreat much,” he said. “This situation will give it a bump.”

Australian coking coal futures on the Singapore Exchange rose 4% Thursday to $315 a ton.