Russian coal set to benefit from trade spat between Australia and China

Russia has set its sights on China to expand its coal exports and overtake Australia as the primary provider to one of the world’s largest economies.

Russia is set to swoop in to take advantage of the escalating trade spat between Australia and China that has financially bruised Australia’s major export industries.

A Wood Mackenzie report obtained by The Australian has found Russia’s coal industry is set to expand its export market into Asia and is gearing up to compete with Australian coal, which China has traditionally been the primary buyer.

According to Wood Mackenzie analysts, Russian President Vladimir Putin last week met with industry officials to implement a plan to increase coal exports to Asia by nearly 30 per cent over the next three years — an expected increase in output of 34 million tonnes by 2024.

It is understood Mr Putin has ordered plans for the expansion of the country’s rail routes to carry coal from its main mining area to Asia.

“The President’s announcement on March 2 suggests a major departure from the current status quo,” Wood Mackenzie analysts said.

Russia wants to expand its coal exports to Asia, in particular China. Picture: Lyndon Mechielsen / The Australian

Russia’s endeavours suggest the country is trying to become the major coal provider to China amid the souring relationship between Beijing and Canberra.

The trade spat between the two nations was in part sparked by Australia’s leading call for a global independent inquiry into the origins of the coronavirus pandemic.

China has slapped tariffs on Australian goods, including coal, barley, wine and live seafood.

However, Australian coal prices have risen over recent months following an increase in demand for the commodity from a pick-up in economic activity since the onset of the pandemic.

Australian coal exporters have also been able to pivot to other markets such as South Korea, Vietnam and Japan.

Relations between Beijing and Canberra have worsened since the beginning of the pandemic. Picture: Greg Baker / AFP

Beijing has started allowing a few Australian cargo ships to dock; however, it may be months until Chinese buyers can try to resell the commodity in other markets.

Wood Mackenzie analyst Rory Simington told The Australian that cargo ships had been unloaded but were understood not to have cleared customs.

“A number of Australian cargoes have been unloaded in the last month or so. However, we understand none of these has been cleared by customs,” he said.

“That means the cargoes have been unloaded onto stockpiles in Chinese ports. This means the vessels and their crews are no longer stuck, but the coal is still unavailable to the buyer until it is cleared.”