Coke Prices in China May Keep Surging after SWIFT Is Banned in Russia

SHANGHAI, Mar 2 (SMM) – On February 27, US, the European Union, Britain, and Canada issued a joint statement announcing the latest sanctions against Russia, prohibiting Russia from using the "Society for Worldwide Interbank Financial Telecommunication" payment system (SWIFT). SWIFT is the safest, most convenient and most important cross-border payment system in the world, with about 11,000 members, including nearly 300 Russian banks.

Due to this sanction, Chinese customers who plan to buy coking coal from Russia have suspended transactions, and it may lead to an interruption of coking coal import from Russia. Chinese customers are reluctant to purchase coking coal from US and Canada due to the high costs. A the same time, the serious COVID-19 pandemic in Inner Mongolia have significantly impacted China’s coking coal exports.

In this context, what impact will be exerted on China’s coking coal market?

Russia is the second largest coking coal supplier to China. In 2021, China imported 106.73 million of coking coal from Russia, accounting for 19% of the total imports. The interruption of Russian coking coal imports will directly prompt the domestic coking coal enterprises in Shaanxi and Inner Mongolia, which used to import coking coal from Russia, to rush to buy the coking coal from surrounding areas. It will cause the shortage of coking coal supply and push up the prices significantly. As of March 1, the coking coal prices in Shanxi have generally risen by 600 yuan/mt, the price of SHFE 2205 coking coal contract has risen by 5.50%, and the price of SHFE 2205 coke contract has risen by 5.39%.

According to SMM analysis, the coke supply is tight, and the rising coking coal prices will provide strong support for the coke prices. The second round of coke price hike is expected to come soon.