Restored Import Tax Hits Russian Coal Sales to China

Russia’s coal sales to China plunged by 22% in January and February compared to the same months last year after China re-imposed an import tax, which makes Russian coal more expensive.

The reintroduced import tax on coal doesn’t affect either Australia or Indonesia, two major coal exporters and direct competitors of Russia, because they have free trade agreements with China.

Despite the jump in total Chinese coal imports in the first two months of 2024, Russian sales plunged, according to official customs data from China cited by Bloomberg.

Chinese coal imports soared by 23% year-over-year, but imports from Russia plummeted by 22% to 11.5 million tons.

China removed the import tariff shortly after the Russian invasion of Ukraine upended the energy markets in 2022 and sent coal prices soaring to all-time highs at times when China was struggling to avoid blackouts. Now the tax has been re-imposed in a bid to protect Chinese coal mining firms and Chinese production, which has hit a record-high in the meantime.

Currently, Indonesia is China’s top coal supplier, while Russia keeps its second spot.

Russia is struggling to sell its coal to the wider Asian market, too.

The lower prices of coal from major exporters Indonesia, South Africa, and Australia are weighing on Russia’s capacity to sell more of its coal to Asia, which has become Moscow’s primary export market after the West slapped embargoes on its coal in 2022.

China, South Korea, Turkey, and India are currently the top importers of coal from Russia. These countries received over 80% of Russia’s coal exports between August 2022 and July 2023, compared with 47% from August 2021 to July 2022, the U.S. Energy Information Administration (EIA) said in an analysis early this year.

Domestic logistical challenges are also weighing on Russia’s coal exports.

According to the EIA, “limited eastbound rail infrastructure from the Kuzbass region in Western Siberia, where coal production is centered, leads to congestion, delays, and longer turnaround times.”

By Charles Kennedy for Oilprice.com

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