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April 8, 2025 - A fresh round of tit-for-tat tariffs between the US and China has shaken the metallurgical coal market, threatening to derail US exports just as they were rebounding, and forcing suppliers to seek new buyers in an already oversupplied Asia.
Washington's additional 34% tariff on Chinese goods, effective April 9, will bring the total duty on China to 54%.
In response, Beijing imposed an additional 34% tariff on US goods, effective April 10. This means US met coal exported to China will face a hefty total duty of 52%.
"That just drove a stake through the heart of the US met coal sector...," an Australian miner said, reflecting similar sentiments across the Asian market.
Market sources expect the tariff conflict to eventually choke US met coal flows to China -- the world's largest steelmaking nation -- exacerbating challenges already faced by US exports due to slow seaborne demand and prices since the fourth quarter of 2024.
US met coal seaborne export volumes recovered in 2024, reaching 50.34 million mt, just shy of the 51.46 million mt recorded in 2018, S&P Global Commodities at Sea data showed.
US exports to Asia -- India, China, Japan, Southeast Asia and South Korea -- rose to 22.64 million mt in 2024, up from 13.99 million mt in 2018.
However, in Q1 2025, US export volumes totaled 6.58 million mt, down 48% year over year, amid more challenging market conditions.
Chinese traders and steelmakers said the new reciprocal tariffs were unlikely to significantly impact China's met coal imports, as US coals were already priced uncompetitively following the 15% tariff added in February, bringing the total effective tariff to 18%.
"China was the lowest-paying market before any tariffs, and when the first round came into effect, it pretty much killed off all US coal imports to the country," a US miner said.
Domestic sentiment was hit hard as futures prices on China's Dalian Commodity Exchange and Shanghai Futures Exchange for ferrous products, including steel, iron ore and met coal, tumbled April 7, following the latest tariff escalations from Washington and Beijing.
Sources expected the weak futures performance to eventually drag down the Chinese physical market and prices, while traders anticipated CFR China met coal prices would further decouple from rising FOB Australian levels amid tightening supply.
"Those indicators could also affect the international market. Why would India or SE Asia buyers pay more in China's absence?" a regional trader said. "US supply will eventually be pushed to them [India and SE Asia]. It has to go somewhere."
US miners are facing "challenging and tough times," another trader said. "Of course, they would love to sell to India, but at current price levels and with the uncertainty of US penalties on Chinese ships... these factors are not supporting them."
Sources suggested that for US miners to find a workable price for India, their FOB Australia equivalent should be in the $190-$220/mt range for premium hard coking coal, still a way off from the current level of $177/mt on April 7.
While the US domestic market has shown stability in met coal consumption, its market share remains relatively low compared with exports, according to US market participants, limiting its ability to absorb all available volumes.
"US miners have work to do; they will need to market their coal in India," a third trader said.
Steel Demand May Pressure Coal Prices
In terms of the tariff dispute's knock-on effect on potential reductions in seaborne steel demand, India-based sources remained relatively unfazed, adopting a wait-and-see approach.
"It is still unclear what the global demand contraction [for steel] will be if the tariffs persist long-term," an Indian trading analyst said. "But for the Indian steel industry, exports make up only a small percentage of total production, so most consumption is still driven by the domestic market."
This aligns with India's latest protectionist move, where on March 19, the Directorate General of Trade Remedies recommended a 12% provisional safeguard duty on imports of non-alloy and alloy steel flat products from China and Vietnam for 200 days.
"Barring India, I definitely see [steel] production cuts coming in other countries," a local Indian trader said, adding that this could weigh on met coal demand in those regions.
In Japan, market sources expressed concerns that neighboring countries may implement similar protectionist tariffs as a knock-on effect.
"Japan's [steel] exports to the US are minimal; Japanese steelmakers are more concerned about potential antidumping tariffs from South Korea," a Japanese trader said, adding that SE Asia is also a key buyer of Japanese steel.
In Q1 2025, South Korea launched antidumping investigations into imports of hot-rolled steel plates from Japan and China.
"Everyone is just frantically plugging holes," a regional met coal trader said, adding that eventually, steel-producing nations reliant on exports will be forced to consider production cuts.
In Europe, reactions in the steel market were similarly mixed, with primary concerns focused on specialist steel products and original equipment manufacturers exporting directly to the US automotive industry.
The US' 25% tariff on imported automobiles, effective April 2, is expected to cause further disruptions to trade flows in the coming months, impacting both Europe and Asia, sources said.
Domestic flat steel prices in Europe have turned increasingly bullish in recent weeks, driven largely by supply-side factors, while most midstream buyers reported sluggish demand from end-consumers in key sectors.
Additional disruption came from the European Commission's Steel and Metals Action Plan and safeguard investigations, which tightened import quotas from key origins and introduced stricter origin tracking of downstream products through the "melted and poured" rule.
A service center source suggested that the recent changes, combined with US tariffs, could significantly shift trade flows.
"We might see more domestic buying to avoid the administrative burden," the source said. "But for now, US dollar volatility and the broader macroeconomic picture aren't favorable for the industry." |
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