Russia looks to replace banned Australian coal exports to China

Russia’s coal miners could boost exports to China, the world’s number one energy consumer, after Beijing slapped tariffs on Australian imports amid a growing trade rift.

Chinese authorities completely halted supplies of coal from Australia in late 2020 after Canberra voiced its support for an international inquiry into China’s handling of the coronavirus crisis.

But with China’s appetite for energy imports steadily increasing, Russia is looking to fill the void by boosting coal exports to its neighbor.

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“As imports of coal from Australia to China are expected to decline, Russia has a chance to replace at least part of it with its own coal,” said TS Lombard analyst Madina Khrustaleva, as quoted by SCMP, a Hong Kong-based English-language news outlet.

The expert noted that Russia has several large coal deposits ready to begin supplying China, with transport being the only hurdle.

Mutual trade between Russia and China has been growing since 2014, and China has since become Russia’s biggest trade partner.

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“Russia is clearly in pole position to substitute imports from Australia. The increase in oil prices is also helping Russia, so all in all there are really tailwinds for Russia,” Alicia García-Herrero, chief economist for Asia-Pacific at Natixis, told the media.

Over the past year, a political rift between China and Australia has spilled over into the economic world. Chinese authorities applied import duties on a wide range of Australian produce, including wine, lobster, meat, barley, timber, and coal. Canberra hit back with tariffs on Chinese aluminum, paper, and steel.

Last week, Russian President Vladimir Putin called for boosting coal exports to Asia by at least 30 percent over the next three years. Putin also approved financing for expanding the country’s rail routes for transporting coal to the continent from the Kuzbass region, Russia’s key mining area.

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According to Khrustaleva, Russia has invested in modernizing the Baikal-Amur and Trans-Siberian railway networks, the nation’s key rail routes. The expert also said that Russian coal companies are developing joint ventures with Chinese firms to boost coal trade.

In December, Elgaugol, the company behind the Elga coal project in the Russian Far East, agreed to launch a joint venture with China’s Fujian Guohang Ocean Shipping Group that will export metallurgical coal to China. The Elga project aims to ship 30 million tons of coal to China in 2023, almost doubling Russia’s total coal exports to China, which stood at around 33 million tons in 2019.

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