By Weng Yile

August 14, 2018 - Chinese coking coal buyers were unfazed by Beijing's slapping of an additional 25% import tariff on $16 billion worth of US products -- including coking coal, coke and thermal coal -- from August 23, given ample availability of alternative supplies.

According to Chinese market participants, there are several domestic metallurgical coal grades with similar specifications to US coal that can easily replace US coal once the import tariff is levied.

"US met coal qualities are not competitive, and domestic or Australian coking coal can easily replace US coal," a major Chinese steelmaker said Monday.

Besides, the voyage time from the US East Coast to eastern China's Qingdao is significantly longer at 40-45 days, compared to Australian coal which takes about 14 days from Hay Point to Qingdao.

Adding to this, Chinese buyers have been scaling back purchasing of US coal since June, on concerns over the escalating US-China trade tension when talks on the retaliatory tariff first emerged in mid-June.

"It is too risky to consider any US coal," one buyer said.

Another major Chinese steelmaker which used to buy US coal has stopped seeking US coal since June.

"We are not interested in US coal, but other users in the market could be," a source at the steelmaker said, adding that US coal prices need to be competitive, and that the seller has to absorb the additional 25% tariff before buyers will take up the offers.

Reaction From US Coking Coal Sellers Mixed

"It is difficult for us to sell any US coal to China since the policy came out in June. We are trying to look at markets other than China for opportunities," one seller said.

Another US coal seller however, said China was never a major buyer for his company, and that the additional 25% import tariff has no impact.

But one Chinese seller said he would be looking at alternatives for his US metallurgical coal cargo with 39%-41% CSR, 18%-19% volatile matter and 5%-6% ash that is en route to China as he was not sure if the cargo would reach China before August 23.

Market sources said some alternatives include diverting the cargo to another destination or have the cargo directed to a Chinese port which has a quicker custom clearance time.

However, such a US coal has very specific users and would typically find buyers at northern China's Jingtang port, one steelmaker noted.

The Chinese government on August 9, said it would impose a retaliatory 25% tariff on $16 billion worth of US products effective on August 23, two days after the US imposed a 25% import tax on Chinese products, which took effect the same day.

This would bring the total tariff imposed on US coking coal to China at 28%, as US coking coal imports to China are now subjected to a 3% import duty.

Earlier in June, US products including soybeans, corn, wheat, autos and crude oil worth $34 billion were also subjected to the additional 25% import tariff.

Beijing's announcement last week was in stark contrast to its move in early June, where the government was understood to be encouraging greater metallurgical coal imports from the US in a move aimed at reducing the significant trade deficit between the economies.

In 2017, China imported 2.8 million mt of coking coal from the US, accounting for about 4% of total imports. China also imported 353,553 mt of thermal coal and 21,000 mt of metallurgical coke from the US last year, equivalent to about 0.2% of its total thermal coal and coke imports, Chinese customs data showed.

S&P Global Platts last assessed Premium Low Vol at $184/mt FOB Australia Friday, and US Low Vol Hard Coking Coal at $171/mt FOB US East Coast Friday.