The recent tit-for-tat tariff bouts between the US and China were expected to create a potential glut of US coals being offered within Asia as they get diverted from China.
There were almost no offers for fresh US seaborne cargoes in China on the first day of its market’s return from the Lunar New Year holidays Feb. 5, sources said. The additional 15% import tariff effective Feb. 10, on top of the current 3% tariff, will be ‘very painful’, sources added.
“Buyers (in China) are facing a dilemma,” a Chinese trader said, “those that have paid for their cargoes, or issued their letter of credits, might not have any choice but to pay up for the tariffs when the cargoes arrive. But those that have not progressed to that stage might ask the sellers to revisit the sales.”
Contrastingly, US semi-soft coking coal Bailey’s port side prices in China were heard edging up slightly by Yuan 20-30/mt to Yuan 1,070-1,080/mt ex-stock Shandong port Feb. 5 amid anticipation of fewer Bailey cargoes entering China after the imposition of tariffs.
Concurrently, sellers of US coals to China were heard scrambling to find alternate buyers in the region with some of them even heard holding position cargoes that were already en route.
“We’re asking for bids from potential buyers in Malaysia, Indonesia, India, Japan and South Korea,” a Chinese trader holding a US cargo said. “Diverting the cargo to an alternative destination, however, would incur additional costs, which makes it difficult for a seller to come up with a fixed price offer immediately”, the trader added.
Market sources saw a higher possibility of potential interest from India and Southeast Asia for these displaced US cargoes, given the low steel margins situation that regional steelmakers have been contending with recently.
“If the prices of these cargoes are low enough, it is true that it will entice buyers here to buy them instead of unsold Australian ones. It will ease their costs,” an Indian steelmaker said.
Indian buyers were heard citing an increase in the US cargoes being offered, prompt ones included, such as BC 7, BC 4, Buchanan, and Bailey, since the evening of Feb. 4, after China announced its counter tariffs.
Although no firm offer prices were heard thus far, as sellers were mainly fishing for interested buyers, a trading source estimated semi-soft grades like Bailey’s could be offered well below $120/mt CFR Southeast Asia.
“If Chinese port side prices for Bailey’s is around $125/mt CFR equivalent, for them to sell it, less than additional, 15% could well be around $107/mt CFR China types of level,” a Chinese trader said.
Subsequently, an Australian coal trader anticipated likely knock-on effects to pile on prices of spot Australian coals, as the sudden glut in US cargoes available in Asia could eventually put ‘too many fishes in a pond’.
“This glut is no small matter, a US problem is now connected to Australia,” the trader said. “US coals will displace demand in SE Asia and India and then Australian coals will have to go back to China, where prices are low.”
Another Indian steelmaker expected the oversupply of coking coal cargoes to worsen if US coals also started to make their way to the country, while hoping to pick up some US coals at a decent discount.
Meanwhile, some traders dealing with US coals had taken precautions in anticipation of such a tit-for-tat tariff situation, given that buyers in China had already sought protective terms and conditions to buffer for such possibilities since the fourth quarter of 2024.
“We don’t have anything headed to China because everyone was already fearing tariffs before the Lunar New Year,” a China-based trader said.
China has imported 10.7 million mt of US origin metallurgical coal in 2024, according to Chinese customs, accounting for 8.7% of the country’s total imports.
Source: Platts
