Home » China’s Coal Tariffs Hit Russian Exporters Hard

China’s Coal Tariffs Hit Russian Exporters Hard

How the policy change affects the global coal market and the environment

by Motoni Olodun

China has reinstated import duties on coal from January 1, 2024, a move that could hurt Russian exporters who rely on the world’s largest market for fuel.

The tariffs were removed in May 2022 to protect against supply risks after Moscow’s invasion of Ukraine disrupted global energy markets. That helped pave the way for record imports last year, which included an increased share of Russian coal shunned by other buyers. Now, the policy has shifted to safeguard China’s mining companies from the consequences of a glut after domestic output also rose to an all-time high.

According to a government document seen by Bloomberg, the tariff has been raised to 3% for unformed anthracite, coking coal, unformed lignite, and briquette lignite, and to 6% for other bituminous coal, other unbridged coal, and similar solid fuels made from coal.

The decision comes as China faces mounting pressure to reduce its carbon emissions and shift to cleaner energy sources. Coal accounts for about 60% of China’s primary energy consumption and is a major source of air pollution and greenhouse gases. China has pledged to peak its carbon emissions by 2030 and achieve carbon neutrality by 2060, but the transition will be challenging given the country’s huge demand for power and industrial output.

Russia, meanwhile, has become the no. 2 shipper of coal to China and the long-term aim of the two countries is for annual supply to reach 100 million tons. Russia is the world’s third-largest coal exporter and has been expanding its production and infrastructure to boost its market share. However, its coal industry has also faced sanctions and boycotts from the European Union, Japan, and other countries over its role in the Ukraine crisis.

Analysts say that the tariff restoration will hurt Russian coal exporters, who will have to compete with other suppliers such as Indonesia and Australia, which have free trade agreements with China and are exempt from the duties. The price difference between Russian and Australian coal has already widened to about $40 per ton, according to Argus Media.

“The tariff increase will reduce the attractiveness of Russian coal for Chinese buyers,” said Li Ting, a coal analyst at CRU Group. “It will also affect the profitability of Russian coal producers, who have already suffered from rising transportation costs and exchange rate fluctuations.”

However, some experts believe that the tariff hike will not significantly affect the overall coal trade between China and Russia, as the two countries have strong political and economic ties and share common interests in the energy sector.

“China and Russia have a strategic partnership and coal is an important part of their energy cooperation,” said Han Xiaoping, chief analyst at China Energy Net Consulting. “The tariff increase may have some impact on the margins of Russian coal exporters, but it will not change the overall trend of increasing coal imports from Russia.”

Han added that China still needs to import coal to meet its domestic demand and ensure its energy security, especially in winter when power consumption peaks. He said that China will continue to diversify its coal sources and balance its environmental and economic goals.

As the world’s largest coal consumer and importer, China plays a key role in shaping the global coal market and influencing the fate of coal exporters. While the tariff restoration may pose a challenge for Russian coal exporters, it also signals China’s commitment to reducing its coal dependence and advancing its green transition. This could have positive implications for the global fight against climate change and the development of renewable energy.

Source: Bloomberg

You may also like

Leave a Comment

The African Miner is the vanguard of the mining industry, delivering world-class insight and news.

Latest Stories

© 2024 The African Miner. All Rights Reserved.