China Buys Russian Coal as Moscow Seeks New Buyers

Recently released trade data shows that between March and April, imports of coal into China from Russia surpassed 4 million metric tons. Russia is China’s biggest supplier of coal, making up 19% of the nation’s coal imports, which is a 5% increase from the share it had a few months ago. This increase in coal imports into China comes as countries in the West impose sanctions on Russia over its invasion of Ukraine.

The trade of coal between the countries decreased shortly after Russia invaded Ukraine in February and countries in the West began slamming Moscow with sanctions. At the time, Chinese banks were hesitant to offer financing for purchases of commodities from Russia, choosing to evaluate the risk of secondary sanctions.

However, after it became clear that the European Union wasn’t keen on banning imports, which in turn prevented both the Western nations from imposing broader sanctions that would impact other buyers, an increase in purchases was observed. Despite the pledge China made to reduce its dependence on fossil fuels and go carbon neutral by 2060, the country has increased its coal imports to make steel for infrastructure projects and revive its economy.

Lauri Myllyvirta, a lead analyst at the Center for Research on Energy and Clean Air, stated that China’s government was pushing for construction and infrastructure projects, which included projects in the coal industry, to help counteract the effect that coronavirus lockdowns and the real estate slump have had on the country’s economy.

In April of this year, China imported almost 1.1 million metric tons of coking coal from Russia. This figure is roughly 10% higher than what the country imported in April of last year. Coking coal is used in the manufacture of steel. Last year, coal imports into the country increased by over 60%, with domestic output hitting 4.1 billion metric tons.

The severe power shortages that affected millions of businesses and households in the country last year also forced the country to increase its coal consumption to help fuel power stations.

Last week, Premier Li Keqiang of China stated during a visit to a power transmission center that a steady supply of power was crucial for the country’s growth; he also noted that the nation would prevent power crunches from happening again this year.

This trade situation is a win-win for both countries: for China, which needs significant amounts of coal and Russia, which is being shunned by the West. As Russian coal is shunned by the West, a bigger market is likely to open up for players from other regions of the world such as Arch Resources Inc. (NYSE: ARCH).

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