April 9, 2025 - China's proposed implementation of an additional 34% tariff on all US imports from April 10 in response to the new higher tariffs introduced by the US administration on April 2 has heightened caution among participants in the thermal coal import and export markets. While the direct impact on China's thermal coal market remained limited, the tariffs could undermine overall market sentiment and raise concerns about end-user demand, according to market sources.

China imposed a 15% tariff on US coal and LNG imports on Feb. 10.

"The series of tariffs and counter-tariffs introduced by the US and China may influence coal prices through fluctuations in the exchange rate," a China-based trader said. "Specifically, if the exchange rate rises in relation to the dollar, it could make coal imports more expensive for Asian buyers, thereby increasing overall costs in the market. This could lead to adjustments in pricing strategies and potentially dampen demand for imported coal."

Market sources further suggested that some manufacturing companies may reduce production in light of these tariffs, which could result in increased costs being passed on to upstream sectors.

"China's tariffs are not merely retaliatory; they are intended to protect national interests," another China-based trader said. "We hope the US administration acknowledges the drawbacks of these tariff barriers and makes timely revisions."

However, some market participants said they believe thermal coal suppliers may emerge as rare beneficiaries amid the new tariff regime. To generate the most affordable power, Asian power producers may have to increase their reliance on coal while reducing the use of more expensive fuels in their energy mix.

"Maybe in a month or two, there will be increased reliance on coal for power production in Asian countries amid inflated production costs," an Indonesia-based producer said. "However, in a country such as China, if import prices are also not competitive [in relation to keeping energy prices lower], they also can cover the glut from their domestic production."

"In 2024, China imported only 1.5 million mt of US thermal coal, which can easily be displaced by domestic coal," said Pat See Khoo, senior analyst at S&P Global Commodity Insights.

Shift in petcoke demand

As Chinese buying for US-origin petcoke retreated in mid-March after weeks of robust buying driven by lower domestic petcoke supply and higher downstream demand, barring some interest in lower-sulfur cargoes, the 34% tariffs on US imports will further curtail Chinese demand for the fuel, making it shift its reliance to other origins.

Market sources indicated that Russia is likely a viable option for alternative markets but noted that Saudi sulfur levels are too high for most applications in China. Venezuelan supplies are also a consideration, they said, but pointing out that Venezuelan 4.5% petcoke remains unreliable in terms of quality and delivery times, making it a less-than-ideal substitute.

India-based petcoke buyers expect higher petcoke availability in the Indian market. "As limited US cargoes will be heading to China due to tariffs, more volumes would be diverted to India, pressuring prices," an India-based petcoke trader said.

However, China's proactive restocking of petcoke cargoes over the past two months suggests it was gearing up for trade tensions even before they became official, strategically securing tonnages ahead of time to mitigate potential disruptions. This is underscored by the fact that China imported 1.7 million mt of US-origin petcoke in the first quarter of 2025, marking a 29.4% increase quarter-on-quarter and a 23.5% increase year over year, according to S&P Global Commodities at Sea data. Notably, US-origin petcoke imports for February and March reached 0.7 million mt, the highest volumes recorded since April 2024.

Platts, part of S&P Global Commodity Insights, assessed the average price of FOB US Gulf Coast High Sulfur over February-March at $76.85/mt, up from $67.55/mt in the same period last year. Platts last assessed the grade at $80.25/mt FOB on April 2.