China loses its appetite for Russian coal as import costs rise

China is losing its appetite for Russian coal as import taxes and logistical snarls push Asia’s biggest buyer to cheaper alternatives.

Russian exports plunged 22% in the first quarter after Beijing imposed a tax regime at the start of the year that favors some of Russia’s rivals. The higher costs have been compounded by an increase in tariffs on Russian railways amid limitations on capacity, the China Coal Transportation and Distribution Association said in a note. The Kremlin’s surcharge on exports to help fund its war in Ukraine has also hindered competitiveness.

Russian sales to China increased sharply last year to top 100 million tons, firmly establishing the nation as No. 2 supplier to its strategic partner just as Chinese imports were surging. China’s coal purchases rose another 14% year-on-year in the first three months, but it’s exporters in Australia and Mongolia that are reaping the most benefit.   

Imports could soften in April as domestic miners cut prices in the off-season and the Chinese economy struggles to gain momentum, CCTD said. Increased availability of hydropower, particularly after torrential rains in the south of the country, is also likely to reduce coal demand.