China’s increasing appetite for coking coal from Mongolia and Russia is likely to have a severe impact on the dry bulk trade, according to Drewry.
Chinese imports from Mongolia have been skyrocketing on the back of Mongolia’s burgeoning production and improved transport links, the shipping consultancy added.
Mongolian coking coal production reached 82m tonnes in 2023, more than double the 39m tonnes produced in the previous year.
“More than 90% of the landlocked Mongolia’s production is transported to China, with the newly developed railway network easing trade,” said Drewry.
“The commencement of the railway network between Tavan Tolgoi in North Mongolia and the Chinese border was the game-changer in 2023.
“Meanwhile, construction of two additional rail networks began in 2023, signalling a massive potential growth in trade between the two countries in future.”
China’s seaborne imports from Russia have also been growing, by 97% in 2022 and by 24% in 2023.
Drewry attributed this rise to Beijing’s unofficial ban on Australian coal.
It said that despite the resumption of trade between the two nations, China imported only 2.8m tonnes of coking coal from Australia last year, well below the historic average.
“During January-April 2024, China’s imports from Australia remained subdued at only 2.6m tonnes, signalling that the trade with Australia will not reach the pre-ban level in 2024,” it added.
Drewry calculated that for every tonne of coal switched from Australia to Russia, the tonne-mile demand could reduce by up to 62%.
As a result, shipping distances involved could shrink from 4,416 nautical miles (8,178 km) to 1,645 nautical miles (3,046 km).
“The capesize market will be the most impacted as most coal exports from Australia are shipped on these vessels,” it said.
Just 12% of Russia’s coking coal exports are shipped on capesizes, compared with 55% for Australian exports, according to Drewry.
China’s strategic shift towards rail-based imports from Mongolia and increased reliance on Russian coal marks a “transformative moment for the global shipping industry”.
“The new rail networks and China’s heavy investments in Mongolia signal a decisive move away from seaborne trade, drastically reducing the demand for long-haul shipping,” Drewry said.
