China's Russian Coal Purchases Stall as Buyers Struggle to Secure Financing

[Hamartia Antidote]

https://money.usnews.com/investing/news/articles/2022-03-01/chinas-russian-coal-purchases-stall-as-buyers-struggle-to-secure-financing

BEIJING/SINGAPORE (Reuters) - Chinese traders are scaling back imports of Russian coal as they struggle to secure financing from state banks worried about potential sanctions after Russia invaded Ukraine, in early signs of supply disruption from the world's third-largest coal seller.
Coal prices from other exporters Indonesia, Australia and South Africa have jumped this week, with benchmark Newcastle coal hitting a record $274.50 a tonne on Monday, a 15% rise, in the wake of Russia's launch of what it said was a "special military operation" in Ukraine on Thursday.

A related graphic: Key global coal prices: https://fingfx.thomsonreuters.com/gfx/ce/movandlonpa/GlobalCoalPricesMar2022.png

China is Russia's largest coal buyer, taking in more than 50 million tonnes of coal worth $7.4 billion last year via rail and sea from Russia's Far East. Russia accounted for roughly 15% of China's total imports and was its second largest supplier behind Indonesia.

"Most banks have stopped issuing letters of credit after the SWIFT sanctions. As almost all contracts are dollar-denominated, we have no other way to make the payment," said a China-based trader dealing in Russian coal.

A related graphic: Russia coal exports by destination: https://fingfx.thomsonreuters.com/gfx/ce/jnvwebxravw/RussiaCoalExports2021.png

Other traders are in discussions with Russian exporters about paying with the Chinese currency for the first time.

"We're waiting for their response, but trades have been put on hold for now," said a second trader, who imports Russian coal regularly via rail into northeast China.
The United States and its allies on Saturday moved to block certain Russian banks' access to the SWIFT international payment system that facilitates the bulk of international financial flows.

While some buyers could eventually resort to using China's onshore clearing and settlement system, known as CIPS, overall purchases by China have been muted since last week after Beijing cut the domestic price cap that makes coal imports largely uneconomical.

Ample domestic coal inventories and an upcoming seasonal dip in its use for heating mean Chinese buyers can afford to pause imports for now.
But any prolonged supply gap from Russia is a concern for buyers as Beijing maintains a ban on imports of Australian coal and top supplier Indonesia this year imposed new export limits.
Rising freight costs are another worry, with shipping charges already substantially higher from Indonesia and South Africa than from relatively local ports in Far East Russia.

A related graphic: Chinese coal imports face steeper shipping costs if they want to replace Russian cargoes: https://fingfx.thomsonreuters.com/gfx/ce/klvykbdjrvg/CoaltoChinaRates.png

"Global coal prices are unlikely to fall in the near term partly due to the high freight rates," said a Singapore-based trader, adding that the Ukraine crisis added upwards pressure to already elevated freight rates due to supply chain bottlenecks and economic recovery.

 

[casual]

Takes time to make the transition to use sanctions proof banks. But with the amount of money involved, they will sort it out quick.

 

[_Nabil_]

China is buying oil from fully sanctioned Iran, how can it be a problem when the list of some Russian banks to be sanctioned isn't even issued.

 

[nang2]

Takes time to make the transition to use sanctions proof banks. But with the amount of money involved, they will sort it out quick.

Yeah, probably just renegotiate the term since payment in dollar wouldn't work anymore. I am sure Russians are open for renegotiation.

 

[Han Patriot]

That's what Hamartia said about Chinese tariffs and sanctions too. Its been 3 years...... Huawei is still making 90 bil a year and a new honor brand was created and became the 2nd best selling phone. Lol

 

[Last starfighter]

Time to buy from THAR

 

[kankan326]

That's what Hamartia said about Chinese tariffs and sanctions too. Its been 3 years...... Huawei is still making 90 bil a year and a new honor brand was created and became the 2nd best selling phone. Lol

Agree. I don't know why they always make hurry conclusion.

 

[Indos]

Coal price has reached 305 USD per ton. In early February Indonesian government has stated price benchmark for Indonesian coal export price in February is 188 USD per ton.

The jump is extraordinary, much higher than oil price jump.

 

[beijingwalker]

Russia, China agree new coal deal for 100 million ton supply: state media​

Peter Aitken
Mon, February 21, 2022, 4:03 AM·2 min read

Russia and China have agreed on a new deal that will see Russia supply 100 million tons ofcoal in the "coming years" to its southern neighbor.

Sergey Mochalnikov, the head of the Russian Energy Ministry, announced the deal on Friday. The new deal will add to an already lucrative deal Russia signed with India in Nov. 2021 to supply 40 million tons of coal.

"Now, an intergovernmental agreement with the People’s Republic of China is being developed and the figure is 100 million tons," he said. "In the coming years, consumers should receive as much coal as they need."

Russian news outlet TASS, which is owned by the government, reported on the deal, adding that Russia’s share of coal in the Asia-Pacific market has increased by 8% since 2010, with Russia now controlling around 12% of the market.

"We have good prospects until 2030, and Russia should take its share in this growing market," Mochalnkov added.

Russia has amassed nearly 150,000 troops along its southwest border with Ukraine and conducted military drills over the weekend. Russia continues to claim that it has no intention of invading neighboring Ukraine, but President Biden said Friday that he is confident that Russian President Vladimir Putin has decided to invade Ukraine.

The U.S. has threatened to hit Russia with sanctions – both on the state itself and against individuals, including President Vladimir Putin – should it proceed to invade Ukraine.

Robert L. Wilkie, former undersecretary of defense for personnel and readiness during the Trump administration and visiting fellow at the Heritage Foundation, previously told Fox News Digital that China would play a role in mitigating any U.S. sanctions placed on Russia in the event Vladimir Putin authorizes any military action in Ukraine.

"A lot of the talk about economic sanctions is really a pie in the sky because China is now Russia’s banker," Wilkie said. "Xi Jinping will back Putin if sanctions from the West come."

Wilkie focused his argument on Beijing increasing its purchase of oil from Russia, which already stands as the second-largest exporter of oil to China, but the energy market appeared the easiest path for China to provide economic relief to Moscow.

"[China] would start buying a lot more energy from Russia," Wilkie explained. "If we went to move on the SWIFT loan system that gives Russia access to western capital, China would pick up the slack with that."

"Even if the Germans were to do an about-face on the Nord Stream 2, China would pick up the slack – they need the energy as much if not more than Europe does. That's how I would see that playing out," he said.

Russia, China agree new coal deal for 100 million ton supply: state media

A former defense official previously told Fox News Digital that Russia and China's energy relationship could provide economic relief in the event of US sanctions.

news.yahoo.com

 

[8888888888888]

Should be no problem paying Russia for the coal, since China already pays for Iran oil.

 

[ozranger]

No impact on China-Russia trade. Of course financing will be shifted to banks dedicated for non-dollar businesses and therefore you can see some Chinese banks on dollar businesses will have to make some adjustment.

They have done it for Iran and they will do it again for Russia. More importantly China will increase import from Russia and probably create a redistribution hub of Russian goods for third countries. This alternate financial systems will definitely attract more countries to take part in.

Ukraine will miss the planting season due to this war and gas price at Europe is soaring because of the sanction.

https://twitter.com/x/status/1498950880074375172

So, global shortage of food and energy supplies is expected. China and most countries will enjoy Russia's supplies with great affordability while watching the sinking of EU economy and further depreciation of the US dollars.

It is of my great interest to watch if the Federal Reserve can still successfully raise the interest rate this month. LOL that'll be fun!

 

[MH.Yang]

At present, China does have many trade contracts with Russia under renegotiation, mainly because it is unable to pay in US dollars and euros. The contract will not be cancelled, but the payment method will be modified.

 

[hualushui]