China Reinstates Coal Tariffs, Impacting Global Suppliers

• China removed coal import tariffs in May 2022 to avoid supply shortages but has now reinstated them to protect its growing domestic coal industry.
• The reinstated tariffs include a 6% levy on coal for electricity and heating and a 3% tariff on coking coal used in steelmaking.
• Russia, South Africa, Mongolia, and the United States will be impacted by these tariffs, while Indonesia and Australia remain exempt due to free trade agreements with China.

China has reinstated tariffs on coal imports from the start of this year in what could be a blow to Russian exporters.

The levies, Bloomberg notes in a report, were removed in May 2022 to avoid a supply crunch amid a surge in coal demand. Russia, as one of the biggest suppliers of the commodity benefited from the tariff-free regime thanks to China’s appetite for coal.

Following the tariff removal, Russian grew to become China’s number-two coal supplier with the two countries planning annual imports to reach 100 million tons, which may have already happened in 2023.

Yet China also has a large domestic coal industry that the tariffs seek to protect. Domestic production has been growing, with the first three quarters of last year seeing a 3% uptick in total output even as imports rose, too.

State-owned energy major Sinopec recently forecast that demand for coal in China will peak in two years, at some 4.37 billion tons. Over the couple of decades that follow, Sinopec also said, coal will be largely replaced by non-hydrocarbon sources of energy led by wind and solar, rising to the equivalent of 3 billion tons of coal.

In the meantime, however, coal use continues strong in the world’s largest user, and so do imports. To shield its local producers, China will be reimposing a 6% levy on coal imports for electricity generation and heating and a 3% tariff on coking coal that is used in steelmaking and other heavy industries.

Besides Russia, other countries that will be affected include South Africa, Mongolia, and the United States. Indonesia and Australia, on the other hand, will not be affected because of their free trade agreements with Beijing.

The tariffs only apply to importers with the status of most-favoured countries. Other importers face a much higher import tariff of 20%.

By Charles Kennedy for Oilprice.com

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