Asia Traders Ready, Willing, Unable to Buy Russian Coal

Citing an inability to find an appropriate payment arrangement, would-be purchasers of discounted Russian thermal coal based in Asia have not been able to close deals due to US and other sanctions in place against Russia.

S&P Global Commodity Insights reported on 29 April 2022 that offers on a CFR basis have been made to interested buyers in Vietnam, Thailand, and the Philippines, but banks have been unwilling to issue letters of credit or carry out telegraphic transfer of funds.

One Thailand-based trader quoted by S&P Global said: “Banks know that some linkages of the payment will be through the US, at least in Thailand so it is not easy to do the transaction. People are interested in buying but payments cannot be done.” Another trader in Singapore stated: “I did get offers but since I cannot trade in them, there is no point in discussing.”

At present although India is facing shortages in thermal coal, it has also struggled with acquiring Russian coal due to a dearth of payment options. This could change, however. Market sources have told S&P Global that they expect India to absorb a considerable amount of displaced Russian coal as price-sensitive buyers will likely look favorably to the discounted Russian volumes. Moreover, an Indian government agreement with Russia for boosting the supply of coking coal could lead to a similar increase of thermal coal.

Data suggests that Russian coal could be delivered to India at a significant discount compared to other options with S&P Global’s market sources anticipating a two-tiered global market to emerge as other coal suppliers would likely not be able to match such low levels.

Traders also foresee increased demand for Russian coal from China due to a reduction in import tariffs and delivery cost advantages given China’s closer proximity to Russia’s Pacific load ports.