In response to the US slapping tariffs on Chinese goods, China last week responded by saying that a number of US imports including would be subject to a 25% tariff.

 

"Before the tariff rise, China's import coal tariff for US was at 3-6% while Australia and Indonesia were exempted," Wood Mackenzie said.  

 

"Taking into consideration of the higher freight, US coal was never a cost competitive supplier into China on a delivered quality adjusted basis, unless there is a major unexpected supply disruption from Australia. 

 

"Having said that, current high coal prices have encouraged more high cost US supply into the Pacific market amid domestic demand weakness."

 

In Q1 2018, China imported 400,000 tonnes from the US, accounting for roughly 2.6% of China's total coal imports and 1.7% of US total coal exports. US contribution to China's coal imports peaked at 4% in 2012.

 

With China's higher tariff, US coal may have to redirect the cargos to elsewhere such as India or the EMEARC region of Europe, Middle East, Africa, Russia and Caspian  in the longer term for a better margin, according to WoodMac.