After the United States imposed a 10% tariff on all Chinese products effective on February 4th, retaliatory tariffs on some American goods by China took effect earlier this week, escalating the trade war between the two countries. Industry officials indicated that the United States is considering increasing coal exports to India in response to these tariffs.
China has imposed a 15% tariff on coal imports from the United States. According to a report by Reuters on Tuesday, industry officials mentioned that this move could prompt American businesses to redirect coal shipments to India, which is the world’s second-largest coal importer after China.
Vasudev Pamnani, the head of I-Energy Natural Resources in India, stated, “Three batches of American goods originally destined for China have already arrived in India, with approximately 10 more batches awaiting shipment. These are massive Cape-size vessels that could potentially drive down coal prices further.”
Cape-size vessels are large dry bulk carriers with a capacity exceeding 100,000 tons, capable of navigating through the harsh weather conditions around Cape Horn in South America, primarily used for transporting mineral ores and considered essential for the coal trade.
While the United States accounts for only a small portion of China’s coal imports in terms of quantity, the value of coking coal (mainly used by steel manufacturers) shipments grew by nearly one-third in 2024, reaching $1.84 billion.
Malcolm Roberts, the chief marketing officer of Peabody Energy, the largest coal producer in the United States, mentioned in a conference call with analysts last week that due to the tariffs, more American coal might be directed towards India, while a higher volume of Australian coal could potentially flow into China.
Over the past decade, Australia has been the primary supplier of coking coal to India, representing roughly 80% of all such shipments. However, diversification was achieved in recent years with contributions from the United States, Russia, and Mozambique.
According to The Wall Street Journal, while China remains a significant market for American energy, it is not the largest customer for major commodities like crude oil and coal. Energy-exporting countries typically have little trouble finding new buyers for their products.