The thermal coal market is experiencing increased caution as tensions between the U.S. and China escalate. Following the introduction of higher tariffs by the U.S. on April 2, China announced its intention to impose a 34% tariff on all U.S. imports, effective April 10.
Although the immediate effects on China’s thermal coal market may be limited, these tariffs contribute to an overall uncertainty, raising concerns about end-user demand. China had previously implemented a 15% tariff on U.S. coal and LNG imports on February 10.
Market participants express concern that the fluctuating tariffs may affect coal prices influenced by exchange rate variances. A trader based in China highlighted that a stronger dollar could increase the cost of coal imports for Asian buyers, resulting in potential shifts in pricing strategies and reduced demand for imported coal.
Some manufacturing firms might cut back production in response to these tariffs, potentially pushing costs onto upstream sectors. Another trader emphasized that these tariffs aim to safeguard national interests, hoping for a reconsideration by the U.S. administration regarding these barriers.
On the other hand, certain thermal coal suppliers could benefit from the evolving tariff landscape. Asian power producers might turn to coal to generate affordable electricity amidst rising production costs.
An Indonesia-based producer suggested that increased reliance on coal for power production could occur in Asian nations if import prices remain non-competitive. Moreover, the demand for U.S.-origin petcoke has diminished in China following the tariff announcement.
While Russian sources might serve as alternatives, the high sulfur levels of Saudi exports and the reliability issues surrounding Venezuelan supplies limit options. Indian petcoke buyers foresee a rise in availability as U.S. shipments to China decline, leading more volumes to be diverted to India, potentially driving prices down.
China’s strategic restocking of petcoke in anticipation of trade tensions reflects its proactive approach to securing supplies. In the first quarter of 2025, China imported 1.7 million metric tons of U.S. petcoke, up significantly from the previous quarter.
This steady increase in imports, along with a rise in prices, underscores the ongoing fluctuations and challenges within the coal market.