China’s imports of Russian metallurgical coal, a key feedstock for steelmaking, hit a record in April, shipping data shows, driven by steep discounts compared with other suppliers and increased availability of bank credit for Chinese buyers.
A record 1.37 million tonnes of seaborne Russian coking coal arrived in China in April, data tracked by analytics firm Kpler showed. That compares with 922,673 tonnes in March and just under 750,000 tonnes in April 2021.
China imported an average 4.55 million tonnes of coking coal monthly in 2021 from all sources.
Global coal markets have been in disarray since Russia’s invasion of Ukraine triggered worries of sanctions on raw materials exported from Russia, the sixth-largest coal producer.
While most importers have shunned Russian supplies since Moscow launched its so-called special operation in February, some buyers in top coal consumer China aggressively stepped up purchases last month once they had secured the necessary credit arrangements with banks.
Coal trade between China and Russia stalled in late February when banks suspended issuing letters of credit as the United States and allies vowed to block certain Russian banks’ access to the SWIFT international payment system.
However, as some Chinese banks relaxed restrictions on credit letters to certain clients, coal trading with Russia resumed in March, although some hurdles, such as shipping and insurance, remain.
“Firms eligible to acquire credit letters are gobbling cheap Russian coal, not only for themselves but also for reselling to those who have payment problems,” said a Beijing-based coal trader who declined to be named as he was not authorised to speak to media.
Refinitiv trade flow data showed that arrivals of Russian thermal plus coking coal reached 4.37 million tonnes in April, double the level in the previous month.
Chinese customs data showed that total coal imports in April rose 43% from March. Data on imports by origin will be published on May 20.
PRICE PRESSURE
Steep discounts offered by Russian exporters have been a strong draw for buyers.
Premium Russian coking coal at northern Chinese ports traded at an average of $386 a tonne in April, compared with $473 a tonne for Australian coking coal of similar quality, traders said.
Domestic prices for premium coking coal hovered around 3,260 yuan ($488) a tonne in April.
Imported coal is subject to 13% value-added tax.
Traders said that while the coal import binge in April likely extended into early May, China’s appetite for steelmaking ingredients may now slow as movement restrictions for stopping the spread of COVID-19 stifle economic activity and steel producer profitability.
“End consumption in China is really poor now, profit margins at mills are thin and they’re reluctant to churn out too many steel products,” said a Shandong-based coking coal trader who also asked to stay anonymous.
Blast furnaces’ capacity utilisation rates at 247 steel mills across China stood at 81.9% in early-May, well below 90% in April 2021, data from Mysteel consultancy showed.
Despite recent weak economic data, China’s central bank this week said it would not resort to flood-like stimulus and would not use property – the source of 35% of steel demand – as a short-term fix for the economy.
Other major coking coal suppliers to China are Indonesia, Mongolia, the United States, Canada and Australia.
Source: Reuters
