The ongoing war in Ukraine can derail China’s coal import plans, analysts say.
As the armed conflict continues, coal prices have risen in China amid the ongoing energy crunch. It is expected to strike a blow to the Chinese economy, Bloomberg reports.
Fears of continuing escalation in Ukraine are pushing up the price of coal, threatening to disrupt energy supply and boost fuel demand. “As long as those tensions continue, we’re likely to see prices remain elevated,” Peter O’Connor, an analyst at Shaw & Partners Ltd in Sydney said.
On February 28, China’s state planning agency announced new measures to cool down coal prices. However, the Chinese coal market cannot insulate the country from rising energy prices, despite its size.
Furthermore, China is under pressure from soaring oil prices. The benchmark Brent brand surpassed $100 per barrel, and some Chinese gas prices have hit records. Last year’s energy crunch turned into a new crisis amid the worsening geopolitical situation.
Experts say Beijing’s efforts to subdue rising coal prices are not unlimited. The Chinese economy is not sufficiently protected from rising energy prices. However, the situation in Ukraine can unlock new coal supplies for industry, ultimately benefitting Beijing.
If Russian commodities get locked out of the European markets due to sanctions, more coal could flow to China. Currently, Russia is the second-biggest coal exporter in the world. Earlier, Germany announced it would shift away from Russian coal and natural gas. Furthermore, the future of the Nord Stream 2 pipeline is uncertain. According to Robert Habeck, German economy minister, the pipeline’s launch is impossible in the short and medium-term.
