Traders in China Dump Cheap Coal in U.S. for Domestic Supply

Several coal traders in China handling imports from the U.S. have starting sourcing domestic supplies for the future, people knowledgeable about the situation have said, as delivery of the last cargoes from the U.S. is being anticipated prior to the hefty tariffs kicking in Thursday in a trade row that is quickly deepening between the top two world economies.

Six cargoes or more of U.S. coal were expected to arrive in August, but three of them were still sailing or waiting off ports on Wednesday to unload their cargo.

Beginning Thursday, the U.S. imposing new tariffs on another $16 billion in Chinese goods and retaliatory measures have been pledged by Beijing that will include even more tariffs on an amount similar to that of imports from the U.S. including on fuel, metals and coal.

One major Chinese coal trading house just cleared its final U.S. coal cargo earlier in the week at Qinhuangdao port, said a manager with the company.

The manager added that the company has stopped all its U.S. metallurgical coal imports, which are popular amongst steel mills. He added that there was too much uncertainty related to that trade.

The cargoes that are still due for this month were mainly booked last May after the first threat by Beijing to place heavy tariffs on coal and buyers in China were able to scoop up large volumes at low prices, said the manager.

Another mill said that it would increase its domestic coking coal purchases rather that foreign supplies to meet client’s demand. That policy will likely gain more traction in the days ahead.

Unless coal producers in the U.S. give a big bargain, buyers in China will not be importing coal from China, said a local coal trading consultant.

The appetite in China for coal from the U.S. grew in 2018 as traders looked for new supplies after the coal prices in Australia hit highs of six years during July.

Some buyers in China were hoping to use the current trade war as a way to bargain to receive even less expensive supplies from the U.S.

A utility that is state owned in China asked coal miners in the U.S. for a discount on prices following the escalation of the trade dispute, but were denied a source with direct knowledge said of the conversation.

Coking coal futures were up 12% since July.