China faces its most severe power crisis since years because of a shortage of coal. Analysts told CNBC that Australia does have the coal Beijing requires, but the second largest economy in the world is not likely to lift an unofficial ban against Australian coal imports any time soon.

That’s despite recent media reportsIt is believed that China has begun to release small amounts of Australian coal which was held at Chinese ports for many months because of the ban.

CNBC’s Vivek Dhar spoke out to say that reports that tiny quantities of Australian coal had been allowed through Chinese customs have increased speculation about whether Chinese authorities might relax their ban on Australian imports. Vivek Dhar is a mining and energy commodities analyst with the Commonwealth Bank of Australia.

He stated that he did not believe the Chinese authorities would relax China’s winter ban on Australian coal.

China cut off purchases of Australian coal late last year. This happened in the following: trade tensions between the two countries soaredCanberra has endorsed a call to an international inquiry into Beijing’s treatment of the Covid-19 epidemic.

Before that, Australia was a major coal supplier to China — in 2019, some 38% of Chinese thermal coal imports came from Australia.

China relies on heavily on coal for power generation

From mid-August at least 20 provinces across the country have reportedThere have been power outages of various degrees. This was caused by a variety of factors, including the shortage in coal supplies and tougher government mandates to reduce emissions. Also, higher demand for manufacturing as the global economy recovers from its pandemic lows.

Reports claim that officials have instructed top energy companies owned by the state to make sure supplies are secure for next winter.

Analysts warn that Beijing is unlikely to lift Australia’s import restrictions anytime soon.

However, the experts predict that China will seek to expand its coal-producing capacity, tap other foreign suppliers, and reduce emissions.

Rory Simington (principal analyst, Wood Mackenzie) says that there is no evidence China will permit companies to buy new shipments from Australian coal.

He stated that “the political situation hasn’t improved at any point” to CNBC.Squawk Box Asia” In October mid-October. “This is largely an issue of politics and not one economic. And, yes, there’s no sign that this ban will ease on any new cargoes.”

Beijing could also seek out other countries that have more coal.

CNBC’s Abhinav Gatta told CNBC that China will likely push Indonesian producers for more coal, although they are near peak capacity. Abhinav is a dry cargo research analyst with shipbroking company Braemar.

China has been trying to obtain more Mongolian or Russian coal in order to meet its demands. However, the European buyers are putting some pressure on Russia to buy Russian coal. Gupta also stated that China has been buying more coal in the Atlantic from US, Colombia and other suppliers.

Dhar of Commonwealth Bank stated that, despite Australia’s informal ban on imports, China has been able to maintain its thermal coal imports “fairly well”, due in part to the increasing supply from Russia and Indonesia. He said that between January and August Indonesia was responsible for 57% of China’s thermal coal imports.

Australian thermal coal is at Newcastle Port. This port serves as the reference for Asian markets. surged this year despite China’s import banAccording to Argus, a commodity price provider

Dhar stated that the main factor driving current prices for thermal coal, especially from Australia is North Asia’s demand ahead of winter. Dhar said that Australian coal prices will likely be affected by how cold winters are.

Elevated coal prices won’t fall instantly even if China lifted the ban on Australian imports, says Shane Oliver of AMP Capital, chief economist and head investment strategy.

In an email, he stated that “I don’t think China will lift the import ban. It would not have any effect on Australian producers because they would just redirect back towards China while still getting the same price.” The sky-high prices will not be sustained, but they might still continue. [be]For a time, it was high.”

Australia has the following: export earnings have held up wellOliver claimed that this was despite the recent coal ban, and sharp decline in iron ore price.

Dhar, a Commonwealth Bank official said that Beijing would continue to buy coal from Canberra if it wanted to increase the Australian market and help prices.

Yet, Australian officials have condemned China’s trade sanctions extend to other export items — such as wine and barley.

In a statement to the World Trade Organization last weekAustralia stated: China claims that the actions are legitimately motivated by trade concerns. But, there’s growing evidence that China’s actions were driven by political considerations.