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COAL | FREIGHT

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China import tariffs exacerbate Russian coal export woes

(Montel) Russian coal exports have dropped to their lowest levels in nearly four years as the introduction of a Chinese import tax exacerbates the existing ban on sales to Europe, market participants said on Friday.

Russia exported just 11.2m tonnes of coal in December, the lowest since February 2020, according to provisional Kpler estimates.

While dry bulk data provider DBX pegged last month’s exports somewhat higher, at 13.5m tonnes, it provisionally expected volumes to slip to a near four-year low this month, of 11.4m tonnes.

“China’s reintroduction of tariffs on imports of Russian coal from the start of January 2024 was a key factor in the slump in the latter’s December exports,” Alexis Ellender, lead major dry bulk analyst at Kpler, told Montel.

China has slapped a 6% import tax on thermal coal imports from Russia, South Africa the US and Mongolia. But Australian and Indonesian supplies remain tariff-free under separate agreements.

As such, Kpler provisionally saw Russia having exported around 3.2m tonnes to China last month, down from 4.5m tonnes in November and the lowest since March 2022.

Struggle to compete
“Reintroduced Chinese tariffs came on top of Russian export tariffs, implemented from October 2023 – and subsequently repealed at the start of 2024 – and meant Russian miners were struggling to compete with tariff-free thermal coal from Indonesia,” Ellender said.

Also, he noted there was seasonally lower import demand from India last month.

This came in the wake of an EU-wide ban on Russian coal since August 2022 – in response to its invasion of Ukraine – with producers since having sought to forge new markets elsewhere, particularly in Asia.

“We are trying to export as much as possible to Asia,” said a Russian coal trader, noting his company produced lower-grade material which formerly would have been used by generators in Balkan countries.

“Prices in Asia are good, but competition [with other suppliers] is high,” he noted.

An analyst with a coal trading house said while final data for Russia’s December exports was yet to emerge, he had seen a notable drop in rail shipments of coal to ports.

“This is mainly driven by railings to southern ports,” he said, with rail capacity to Black Sea ports constrained by military logistics.

Russian exports had slumped to a four-year low of just over 11m tonnes in February 2020 as weak seaborne prices then deterred exporters amid lacklustre European demand amid the spreading Covid-19 pandemic.

Today, Russia remains the world’s third-largest exporter of thermal coal, after Indonesia and Australia.