AUSTRALIA’S coal producers may have to start cutting output if China maintains limits on imports from them, the Australian government said, forecasting a sharp fall in coal export revenue this year.

China is the second-biggest buyer of Australia’s thermal coal burned in power plants and metallurgical coal used to make steel.

But Australia’s coal exports have been hit by delays at Chinese ports and prices have fallen amid a growing row between the two countries.

“The bottom line for Australian coal producers is lower profitability and the likelihood of production cuts the longer the Chinese restrictions remain in place,” the Australian Department of Industry said in its quarterly resources and energy outlook.

Chinese media reported that China’s top economic planner had granted approval to power plants to import coal without clearance restrictions, except from Australia.

China’s foreign ministry spokesman later said he was not aware of the situation but the competent authority had been adopting relevant measures on goods imported from Australia.

Metallurgical coal export revenue is expected to slump 35% to $22bn in the year to June 2021 from a year earlier, the Department of Industry said in its report.

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The forecast is $1bn lower than the previous outlook in September, as prices for Australia’s metallurgical coal fell in the December quarter. Volumes are expected to fall around 5%.

“The recovery of Australian metallurgical coal prices will largely depend on Chinese government policy and signals,” the department said.

Thermal coal export revenue is forecast to drop 29% to $15bn, in line with its previous outlook.

Volumes are expected to fall nearly 7% to 199 million tonnes after suffering their largest quarterly fall in the September quarter since records dating back to 1988, the department said.

Nevertheless, the government raised its outlook for total resources and energy exports for the year to June 2021 to $279bn, up 9% from its September outlook, thanks to soaring iron ore prices.

Iron ore export revenue is expected to climb to a record high of $123bn, up 20% on last year, supported by strong Chinese demand and supply problems in Brazil.

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