RPT-COLUMN-Asia's coking coal imports slide in February, but recovery looms: Russell

By Clyde Russell

LAUNCESTON, Australia, March 12 (Reuters) - Asia's seaborne imports of metallurgical coal dropped to the lowest in three years in February amid a slump in demand from top buyers China and India.

However, the factors behind the loss of appetite for the type of coal used mainly to make steel appear temporary, and it's likely that imports will start to recover from April onwards.

Asia's seaborne imports of the fuel, which is also known as coking coal, dropped to 15.85 million metric tons in February, down from 20.42 million in January, and the lowest since February 2022, according to data compiled by commodity analysts Kpler.

India, the top buyer, saw imports drop to 4.56 million tons in February, down from 6.26 million in January, and the weakest since December 2021.

India's steel production has been modestly higher in the fiscal year that started in April 2024, with 124.8 million tons reported for the 10 months to the end of January, up about 4.5% over the same period in the previous fiscal year.

However, output appears to have been soft in recent months as the industry grapples with two issues, namely higher imports and a government restriction on importing coke, one of the raw materials used to convert iron ore into steel.

In December, India, the world's second-biggest producer of crude steel, imposed quantitative curbs with country-specific quotas on imports of low-ash met coke, restricting total overseas purchases to 1.4 million tons from January until the end of June.

The government aimed to encourage domestic steelmakers to use domestically-produced coke, but some companies have said the local product doesn't meet quality standards, with at least one producer saying it would be forced to curtail output from April onwards.

The second issue is that India's steel imports hit a record high in the first 10 months of the fiscal year, reaching 8.3 million tons, up 20.3% from the same period a year earlier.

The high level of imports has prompted the government to propose introducing what it called a safeguard duty, or temporary tax, of 15% to 25% on steel imports.

The biggest supplier of steel to India was South Korea, with 2.4 million tons in the April to January period, followed closely by China with 2.3 million and then Japan at 1.8 million.

Details of the tariffs are expected to be published within a week and Mint newspaper reported on Monday that 15% is likely to be recommended and will only apply to steel products below certain predetermined prices.

The imposition of tariffs on steel imports should boost domestic steel output and lift demand for coking coal imports.

Demand could also rise if Indian coke producers can convince domestic steel producers that their product is suitable. Coking coal can be turned into coke in a furnace.

CHINA TARIFFS

China, the second-biggest seaborne importer of coking coal, saw imports drop to an 18-month low in February with arrivals of 2.88 million tons, down from 4.60 million in January, according to Kpler data.

China's imports of coking coal tend to soften at the end of the northern winter as steel mills curb output during the lower demand period and also to trim air pollution.

Demand for seaborne coking coal has also been cut by increasing overland imports from neighbouring Mongolia, which rose 5% in 2024 to 56.8 million tons, according to data from S&P Global Commodity Insights.

China's state planner has indicated steel production this year should be lower than the 1.003 billion tons recorded in 2024, which looks fairly bearish for coking coal imports.

But China has also imposed a 15% tariff on imports of U.S. coking coal in February as part of retaliatory measures against a 10% U.S. tariff on all imports from China, later increased to 20% by President Donald Trump.

The duty on coking coal imports from the United States is likely to all but end the trade with China, which bought 5.75 million tons of the fuel in 2024, representing 11.6% of total seaborne arrivals.

China will likely have to seek alternative suppliers to meet some of its coking coal needs, with top exporter Australia and Canada being the realistic choices.

The adjustments to trade flows caused by China's tariff on U.S. coking coal are likely to add some support to seaborne prices, which have held up despite the weak volumes in February.

Singapore Exchange contracts for Australian coking coal SCAFc1 ended at $181 a ton on Tuesday, and are down 12% since the high so far in 2025 of $206 on January 3.

The views expressed here are those of the author, a columnist for Reuters.