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RPT-COLUMN-Russia takes advantage of China's North Korea coal ban: Russell

Published 03/10/2017, 11:00 pm
RPT-COLUMN-Russia takes advantage of China's North Korea coal ban: Russell

(Repeats item issued earlier. The opinions expressed here are those of the author, a columnist for Reuters.)

* Graphic of China's coal imports from Australia, Russia and North Korea: http://reut.rs/2yjMbWK

By Clyde Russell

LAUNCESTON, Australia, Oct 3 (Reuters) - China's coal import data for August flung up an interesting anomaly in the form of renewed imports from North Korea, but of far more interest is the surge in cargoes from Russia.

Customs data showed that China imported 1.6 million tonnes from North Korea in August, the first allowed since February when Beijing tightened sanctions against its neighbour as part of international efforts to restrict the isolated dictatorship's nuclear weapons programme. this generated media headlines, it's likely nothing more than a blip as Beijing had already said it would allow North Korean cargoes stranded at Chinese ports by the sanctions to be cleared.

What is more interesting is how Russia has effectively supplanted North Korea as a supplier of relatively good quality coal to China.

China's imports from Russia were 2.47 million tonnes in August, taking the year-to-date figure to 17.25 million tonnes, a gain of 41 percent over the same period last year.

That equates to about an extra 5 million tonnes from Russia so far this year, while imports from North Korea have dropped by just over 10 million tonnes.

North Korean coal is classified by Chinese customs as anthracite, a grade of coal that doesn't have quite enough energy content to be coking coal, used for steel making, but is generally of higher quality than most types of thermal coal used for power generation.

China generally used North Korean coal for industrial applications and for blending with lower quality coals for power generation.

The industrial applications include sintering, a process of improving the feedstock quality of iron ore before it is placed in a blast furnace, and to make ceramics.

As North Korean imports of anthracite coal have waned with sanctions, those from Russia have soared.

Imports of Russian anthracite were 4.5 million tonnes in the first eight months of 2017, a gain of 212 percent from the same period last year.

Australia, the world's largest coal exporter, also managed to snare a bigger share of anthracite, but its January-August total of 869,916 tonnes, while up 45 percent from the same period a year ago, is only one-fifth of what Russia has supplied.

RUSSIAN PRICE ADVANTAGE

Price is undoubtedly a factor, with Russian anthracite having a landed price in China of $101.25 a tonne, well below the $129.71 of Australian cargoes.

Price is also likely a factor in the other area of Russia's coal success in China, namely coking coal.

Chinese imports from Russia have jumped 108 percent to 3.14 million tonnes in the first eight months of 2017 from the same period a year ago, with the August landed cost at $119.96 a tonne.

This is well below the $153.12 a tonne for Australian cargoes, although Australia remains the dominant supplier to China with a January-August total of 20.16 million tonnes, up 7.6 percent from the same period last year.

Mongolia has also made inroads into China's market for coking coal so far this year, with imports totalling 17.92 million tonnes for the first eight months, up 40.2 percent from the same period last year.

Where Russia has been less successful in China is in what customs terms non-coking bituminous coal, which is thermal coal of a higher quality than low-rank lignite.

China imported 9.26 million tonnes of this grade from Russia in the first eight months of 2017, up 6.7 percent, while supplies from Australia rose 15.2 percent to 31.65 million tonnes.

Neither Russia or Australia supply significant quantities of low-rank coal, which is dominated by Indonesia in China.

However, Russia is on track this year to leapfrog North Korea to become China's fourth-biggest supplier of coal.

While this is largely driven by the sanctions against North Korea, it's worth noting that Russian producers seem to have been able to capitalise on the North Korea ban more successfully than their rivals in Australia.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ China's coal imports from Australia, Russia and North Korea

http://reut.rs/2yjMbWK

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Richard Pullin)

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