Japan, S.Korea coal users cut Russian imports, seek alternatives

Korea Electric Power

08/04/2022 02:25

(Repeats story with no changes to text)
    * Two utilities in Japan, S Korea have halted Russian coal
imports
    * Japan calls on Australia, Indonesia to ensure stable coal
supply
    * South Korea cement makers struggle to find alternative
sources

    By Joyce Lee and Yuka Obayashi
    SEOUL/TOKYO, April 7 (Reuters) - At least two utilities in
Japan and South Korea have halted Russian coal imports in recent
months and others may have to follow suit and join a scramble
for new sources if sanctions are expanded, analysts and company
officials said.
    The two nations combined take about one-fifth of Russia's
coal exports, its biggest customers after China, and if the EU
follows through on a proposal to stop using Russian coal they
will likely face pressure for similar steps, intensifying the
competition for limited alternative supplies.  urn:newsml:reuters.com:*:nL2N2W41H0
 urn:newsml:reuters.com:*:nL1N2UX03H
    "An EU ban would likely force importers in the EU, Japan and
South Korea to cut their reliance on Russian thermal and coking
coal," CBA analyst Vivek Dhar said in note.
    Japan's Kyushu Electric Power Co Inc  9508.T  had already
stopped buying Russian coal as of end-March, a company
spokesperson said, citing the risk of supply disruptions after
initial sanctions on Moscow. The company bought 7% of its
thermal coal from Russia in the year to March of last year.
    The utility is procuring alternative supplies from other
regions, he added, without specifying where.
    "We have no plan to buy Russian coal this financial year,
either," he said.
    In South Korea, at least one unit of state utility Korea
Electric Power Corp (KEPCO) began diversifying coal import
sources away from Russia in February, a source with knowledge of
the matter said.
    "Our portion of Russian coal out of imports was small to
begin with - about 10% last year - and we've stopped ordering
coal from Russia since February, diversifying to other regions,"
said a source at the unit. The source was not authorised to
speak to the media and declined to be identified.
    "The situation is similar for other (Korean) power
generation firms," the source added, but did not indicate which
other regions they were turning to.
    The European Commission on Tuesday proposed new sanctions
against Russia, including a ban on buying Russian coal, in
response to its invasion of Ukraine. Russia calls its actions in
Ukraine a "special operation".  urn:newsml:reuters.com:*:nL5N2W3349
    "It will be very challenging for OECD nations to replace
their coal imports from Russia," CBA's Dhar said.
    "There is simply very limited spare capacity in thermal and
coking coal markets."
    Top exporters Australia and Indonesia have already hit
production limits amid a rush for non-Russian coal supplies in
Asia and Europe that will keep global prices elevated.
 urn:newsml:reuters.com:*:nL3N2W41L2
    Japan, the world's No. 3 coal importer, has long-term plans
to lower its reliance on Russian energy but has not instructed
utilities to suspend coal purchases from Russia, an official at
the industry ministry said.
    "We are asking producing countries such as Australia and
Indonesia for a stable supply just as we do on a regular basis,"
he said.
    "We understand some utilities have reduced procurement of
Russian coal because of the risk to their business," he added,
while noting some had also boosted their coal inventories.
    Japan decided to continue its involvement in Russia's
massive Sakhalin oil and gas projects, which it considers vital
to its energy security.  urn:newsml:reuters.com:*:nL3N2VS213
    Japanese companies, however, have been cutting their stakes
in overseas thermal coal mines as concerns mount about coal's
link to climate change.  urn:newsml:reuters.com:*:nL1N2PO02R urn:newsml:reuters.com:*:nL4N2KA3L8
    Outside the energy sector, South Korean cement makers, which
import about three-fourths of their bituminous coal from Russia,
appear particularly vulnerable as they scramble to secure
alternative supplies, according to two industry sources. They
declined to be identified as they were not authorised to speak
to the media.
    "We had been grappling with rising coal prices since late
last year, but now our biggest concern is if coal imports from
Russia stop altogether," one of the sources said, noting that
the industry only had enough inventory to last until May.
    "The more cement we produce, the bigger the losses. But now,
the worst case scenario is cement production might stop
altogether if we can't get Russian coal."

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Russia thermal, metallurgical coal exports    https://tmsnrt.rs/3xbJoN0
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 (Reporting by Joyce Lee in Seoul, Yuka Obayashi in Tokyo and
Sonali Paul in Melbourne; Writing by Florence Tan; Editing by
Edmund Klamann)
 ((Florence.Tan@thomsonreuters.com; Reuters Messaging:
florence.tan.thomsonreuters.com@reuters.net))