China’s Russia coal imports hit 5-year high

August 21, 2022 12:00 am | Updated 05:41 am IST - SINGAPORE

China buys discounted coal while Western countries shun Russian cargoes over its Ukraine invasion

China’s coal imports from Russia jumped 14% in July from a year earlier to their highest in at least five years, as China bought discounted coal while Western countries shunned Russian cargoes over its invasion of Ukraine.

China brought in 7.42 million tonnes of coal from Russia last month, data from the General Administration of Customs showed on Saturday. That was the highest monthly figure since comparable statistics began in 2017, up from 6.12 million tonnes in June and 6.49 million tonnes in July 2021.

Western countries were avoiding cargoes from Russia ahead of a European Union ban on Russian coal that came into force on Aug. 11, aimed at reducing the Kremlin’s energy revenue.

The ban has forced Russia to target buyers such as China and India and sell at a steep discount.

Russian thermal coal with a heating value of 5,500 kilocalories (kcal) traded around $150 a tonne on a cost-and-freight basis in late July, while coal of the same quality at Australia’s Newcastle port was assessed at more than $210 a tonne on a free-on-board (FOB) basis.

Top oil supplier

Russia also held its spot as China’s top supplier of crude oil for a third month in July, separate data showed on Saturday, as independent refiners stepped up purchases of discounted supplies while cutting shipments from suppliers like Angola and Brazil.

Imports of Russian oil, including supplies pumped via the East Siberia Pacific Ocean pipeline and seaborne shipments, totalled 7.15 million tonnes, up 7.6% from a year earlier, China’s Customs data showed.

Still, Russian supplies in July, equivalent to about 1.68 million barrels per day (bpd), were below May’s record of about 2 million bpd. China is Russia’s largest oil purchaser of oil.

Coal outlook

Some Chinese traders expect more Russian coal to flow into China in the fourth quarter when utilities in northern China build stocks for the winter heating season.

July shipments of Indonesian coal, mostly cheap, low-quality thermal coal with a heating value below 3,800 kcal, were 11.7 million tonnes. That was up 22% from June but down 40% from a year earlier. China has cut its overall coal imports in recent months amid surging domestic output.

Power plants in southern China have increased tenders to buy Indonesian coal in August as it is cheaper than domestic coal, while demand for coal-fired power generation has been boosted by a record heat wave.

Indonesian thermal coal with a heating value at 3,800 kcal was at about $78 a tonne FOB last week, which would still be below about $101 for local coal, with shipping.

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