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New Chinese government threat leaves these ASX mining stocks on tenterhooks

Two red shipping containers with the word 'Tariff' and Chinese flag
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Some ASX mining stocks could come under pressure on reports that China may be banning the use of Australian coal.

Several sources have confirmed to the Australian Financial Review that Chinese authorities have been telling their local traders to stop buying coal from us.

The ban includes thermal coal, which is used in power plants, and coking coal that is used in producing steel.

ASX miners hit by China coal ban

The AFR quoted one Chinese analyst saying he believed the move is “a political sanction against Australia”.

It is also alleged that Beijing only issued a verbal ban. This is because it didn’t want to leave evidence of trade protectionism that could be used against it in the World Trade Organisation (WTO).

However, the financial impact of the ban on Australian coal producers is unclear. Power plants that use Aussie thermal coal have used up their coal import quota two months ago.

Why share prices of ASX miners are reacting differently

This could explain why the share prices of ASX coal producers responded differently when reports of the ban started leaking yesterday.

The Whitehaven Coal Ltd (ASX: WHC) share price crashed by over 5% to 98 cents. But the New Hope Corporation Limited (ASX: NHC) share price dipped 0.8% to $1.30 and South32 Ltd (ASX: S32) share price was flat at $2.19.

Roughly half of Whitehaven’s coal is coking (used for steel), which may be more impacted by the unofficial Chinese ban.

New Hope produces thermal coal from two open cut coal mines in South East Queensland, while South32 produces a diverse range of minerals other than coal.

ASX stocks used as pawns on Sino-Australia chess board

“We are aware of these reports and have had discussions with Australia’s resources industry, who have previously faced occasional disruptions to trade flows with China,” Trade Minister Simon Birmingham said in a statement reported in the AFR.

“Australia will continue to highlight our standing as a reliable supplier of high grade resources that provide mutual benefits.”

Several ASX stocks have been used as pawns in the escalating tensions between Canberra and Beijing. The Treasury Wine Estates Ltd (ASX: TWE) share price and Australian Agricultural Company Ltd (ASX: AAC) share price have also felt the heat.

China is using Australian wine, beef and barley to punish Australia after Prime Minister Scott Morrison called for an independent investigation into the origins of COVID-19.

Given our economic over-reliance on the Asian giant, investors should be prepared for more volatility ahead!

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Returns As of 15th February 2021

Motley Fool contributor Brendon Lau owns shares of South32 Ltd. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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