22 September 2021
Overnight, Chinese President Xi Jinping announced to the United Nations General Assembly that China “will not build new coal-fired power projects abroad”. The statement follows similar announcements made earlier this year by Japan and South Korea.
Since 2013, 65% of global public finance for coal power stations outside China (around US$50 billion) has come from China – with most of that coming from the state-owned banks: Export Import Bank of China ($14 billion) and China Development Bank ($10 billion), and state-backed commercial banks: Industrial and Commercial Bank of China ($6 billion) and Bank of China ($3.5 billion).
Comments attributable to Julien Vincent, Executive Director at Market Forces:
“On face value, this is a killer blow to the future of Australia’s coal exports.”
“Australia’s coal industry has been gambling on increasing coal-fired power generation in developing countries to replace declining long-term demand in places like Japan, South Korea and Taiwan.”
“China’s announcement today is a body blow to Australian coal exporters, whose plans for growth are predicated on delusions of new coal power plants being built across Asia. Recent analysis shows since the Paris Agreement was signed in 2015, the global coal power pipeline has collapsed by 76%. Today’s statement will only accelerate this trend.”
“Just last week the Reserve Bank of Australia warned Australian coal investments are at risk of becoming stranded assets as countries pursue decarbonisation goals. The RBA’s statement followed similar warnings this year by the International Energy Agency that new coal mines and expansions are not required to achieve net zero emissions by 2050.”
“Large pure play coal mining companies like Whitehaven Coal are particularly vulnerable to this news. Whitehaven is pursuing around $2 billion in new coal mines – like the recently approved Vickery mine – on the flawed assumption that coal demand across Asia is set to continue. Whitehaven has also relied on significant Chinese investment – with 40% of its February 2020 refinancing being sourced from Chinese banks.”
“The signal for Australia from today’s announcement could not be clearer – it’s beyond time to plan a future away from coal.”
Market Forces has identified almost $25 billion of lending to the Australian coal industry between 1 Jan 2016 and 31 Dec 2019. Of this amount, Chinese banks provided $3.6 billion (14.5%). This includes lending to coal mining companies, as well as coal export infrastructure such as ports and haulage (and their operators), as well as the owners of coal-fired power stations.
This lending has continued beyond 2019, examples of which include:
- June 2020: Industrial and Commercial Bank of China (ICBC) and Bank of China participated in a A$1.3 billion refinancing of Aurizon Network, operator and manager of the Central Queensland Coal Network.
- June 2020: Bank of China, China Everbright Bank and ICBC participated in a A$975 million guarantee facility for ASX-listed coal miner Yancoal Australia.
- February 2020: Bank of China, Bank of Communications, China Everbright Bank and ICBC participated in a A$1 billion revolving credit facility to ASX-listed coal miner Whitehaven Coal.
- June 2019: ICBC participated in a US$340 million loan to Newcastle Coal Infrastructure Group, owner and operator of one of Australia’s major coal export terminals at Port of Newcastle.
- September 2018: Bank of China, China Development Bank and ICBC participated in US$2.5 billion of loans to the Wiggins Island Coal Export Terminal.