In today's Finshots brief, we will discuss
- Whether China has issued a ban on imports of Australian coal
- How Google is impeding traffic for travel websites
- Some insights from a recent survey on media habits
The Coal Conflict
The Australian government has a perplexing conundrum. Over the last two months, China, the country’s biggest trade partner, has slowed down imports of one of its most valuable commodities - coal. News outlets like S&P Global Platts and Argus Media have reported that state-owned Chinese steelmakers and power plants have been told to stop importing Australian coal. And yet, the Land Down Under has received no official notification from the Red Dragon. So what is going on?
Well, diplomatic relations between the countries have been deteriorating for a while now. When the coronavirus outbreak started, Australia called for an investigation into the origins of the virus. This incensed China, leading them to restrict imports of Australian beef, barley, and wine. The apparent ban on coal imports is just the latest blow.
However, it’ll have the most devastating effects on the Australian economy. You see, Australia's coal export industry is worth $39 billion a year, and Chinese imports account for 25% of this. Moreover, an export ban on the commodity could also violate World Trade Organization obligations as well as a free-trade-agreement between two countries.
But according to Simon Birmingham, Australia's trade minister, the country has received no official notification from China regarding any ban. They are now trying to clarify things with the Chinese government.
However, Chinese buyers are already behaving as if the restrictions are official. As per data compiled by Refinitiv, September imports of all coal types from Australia were 5.48 million tonnes, down from 6.04 million in August and 8.17 million in July. It doesn’t look very good.
However, some analysts suggest that this may not even be related to diplomatic tensions. As Peter O’Connor, analyst at Shaw and Partners says, “It is possible the term ‘ban’ is being confused with ‘quota’ and Australia producers have already reached their import quotas for the year.” After all, imports from Indonesia, China’s biggest supplier, have declined even more. So it’s entirely possible that China does not have an agenda here.
But in either case, this situation might prove adventitious for an unlikely candidate- India. How, you ask? Well, it all relates to coking coal.
Coking coal is a key raw material in steel production- it is used to help turn iron ore into molten steel in a blast furnace. And Australia happens to be the world’s largest coking coal exporter- accounting for about 55% of global trade. In fact, they made up for two-thirds of China’s imports of the commodity in the first half of 2020.
So if China stops buying coking coal from Australia, they’d have to turn to alternate countries like Mongolia, Russia, Canada and the United States. And as prices in Australia suffer, the commodity would become more expensive in these nations, landing Beijing with a very costly import bill.
At the same time, China’s steel-making competitors like Japan, South Korea and India, would be able to access coking coal for cheaper, ultimately making their exports a lot more competitive in the Asian markets.
From Help to Hindrance
Travel agents and websites have always relied on Google to divert traffic to their businesses, collectively spending billions of dollars a year to advertise their services on its search engine. But now, they’re claiming that the tech giant is an unfair competitive threat to them.
Consider recent complaints put forth by Berlin based vacation rental platform HomeToGo. HomeToGo has long depended on Google to get greater visibility for its website. However, it says that since Google has started placing a box of listings from third-party travel sites at the top of search results for vacation rentals, it’s business has been adversely affected. It claims that these kinds of direct search products aim to keep users within Google’s ecosystem instead of sending them to other websites.
According to calculations that HomeToGo provided to The Wall Street Journal, when Google’s listings box was present above its website’s result on search pages, the rate at which people clicked through to its website fell by as much as 75%.
Well, Google claims it sends a high volume of traffic to other websites, and the company only developed the new way of displaying search results in order to provide users with quick access to helpful information. As a spokeswoman for Google said, “Removing these results would create a worse experience for consumers and send less traffic to travel companies.”
Print over Digital
The Centre for Voting Opinion and Trends in Election Research (CVOTER), an Indian international polling agency, recently conducted a survey analysing why audiences consider television superficial, print media credible, and how digital news can be an extension to these platforms. The survey covered over 5000 respondents all over India, including people from each district in each state, and taking into account demographics according to the latest census figures. And the findings are quite interesting.
Turns out, 66% of Indian readers consider print media to be their most important source of information. Despite heavy-duty debates on television and the easy accessibility of digital media, print has much higher credibility. And as citizens turn to things that are safe and familiar during these uncertain times, 63% of respondents consider reading the newspaper to me more important in the COVID-era.
This has important implications for advertising on print media, on which companies collectively spend ₹30,600 crore a year.
On the other hand, the focus of electronic media has shifted to reality TV and sensationalization. This is great for getting more eyeballs, but it damages the credibility of the medium as a whole. And as TV channels go down this path, its likely that newspapers will see further gains in the credibility department. Like Ashish Bhasin, CEO and chairman of India at Dentsu Aegis Network says, “Print has its own strengths, especially with the credibility attached to it in this era of fake news. But it is also time print adapts to the digital onslaught and learns to reinvent itself."
Scope to do more
The lockdown that India had declared to combat the coronavirus led to a contraction of 23.9% in our GDP for the April-June quarter. And even as the International Monetary Fund expects the GDP to shrink by 10.3% in FY21, its Chief Economist Gita Gopinath is calling for a more direct fiscal support and additional monetary easing by the government and the RBI respectively. Know more.
As Americans move to longer-term joblessness aid, applications for U.S. state unemployment benefits unexpectedly jumped last week to the highest since August. Read more.