The recent surge in trade tensions between the U.S. and China, marked by the U.S. imposing tariffs up to 145% on Chinese imports and China retaliating with 125% tariffs, has cast a significant shadow over U.S. coal exports, particularly metallurgical coal to China. In 2024, the U.S. exported approximately 10.7m tons of metallurgical coal to China (+81% y-o-y), accounting for about 9% of China's coking coal imports. However, the newly imposed tariffs have disrupted this trade flow, compelling U.S. coal producers to seek alternative markets. China is expected to increasingly rely on existing suppliers to fill the supply gap. Russia is well-positioned to expand its footprint further, having already exported 30.5m tons of metallurgical coal to China in 2024. Its proximity, discounted pricing due to Western sanctions, and growing rail connectivity make Russian coal an attractive substitute. Simultaneously, Australia—which reentered the Chinese market in early 2023 after the lifting of unofficial bans—exported over 10.4m tons of met coal to China in 2024 (+270% on the year) making the fourth largest supplier, and is expected to ramp up shipments given strong demand and competitive logistics. These two countries, with their abundant reserves and infrastructure advantages, are best positioned to absorb the U.S. market share loss.
Simultaneously, Mongolia has emerged as a key beneficiary of the shifting trade dynamics. In 2024, Mongolia exported 56.8m mt of met coal to China, accounting for 46% of China's imports. Central to Mongolia's strategy is the enhancement of its rail infrastructure to overcome the limitations of being landlocked. The Tavan Tolgoi– Gashuun Sukhait railway, inaugurated in September 2022, has already reduced transport times and costs by replacing truck convoys with more efficient rail transit with further expansions being underway. In April 2025, Mongolia is set to begin construction on a new rail corridor connecting the Nariin Sukhait coal basin to the Shivee Khuren border, which is expected to handle an additional 50m tons annually. Moreover, a second international rail border crossing near Bichigt is slated for completion by 2028, with the capacity to move up to 30m tons per year. These projects are designed not only to boost export volumes but also to diversify Mongolia’s access points to northern and northeastern Chinese provinces, beyond the traditionally used Gantsmod gateway. As a result, Mongolia could significantly strengthen its position as China’s top met coal supplier, challenging the logistical dominance of seaborne exporters, potentially at the expense of U.S seaborne supplier. However, it's worth noting that most Mongolian coal enters inland steel-producing regions and is less suited to supply coastal steel mills, which are typically served by seaborne cargoes — a geographical limitation that still constrains full market penetration.
At the same time, India is a key destination for U.S. met coal, with potentials to absorb a portion of the volumes displaced from China. As China will source more from other nations, India driven by aggressive growth in steel production—is becoming a crucial outlet. Major Indian steelmakers like JSW Steel, Tata Steel, JSPL, and AMNS will expand their crude steel capacity significantly through 2026-2027, with projects adding 20.0m of tons to current output. Because India’s steel sector is predominantly blast furnace-based, these expansions directly translate to higher coking coal demand. The redirection of U.S. coal exports toward India carries broader geopolitical significance, particularly for U.S.-India-China relations. However, U.S. coal faces stiff competition from low-cost coal in the Indian market, potentially creating friction. This dynamic could prompt diplomatic efforts by the U.S. to encourage India to boost purchases of U.S. coal potentially eroding Australia and Russia’s market shares in the Indian market. On the other hand, over the past decade, Australia held a dominant position as India’s main coking coal supplier, providing around 80% of total imports. However, by 2024, its share declined to 62% as India diversified its sources, increasingly turning to the U.S., Russia, and Mozambique. Now, with U.S. exports to China declining due to trade tensions, Australia should regain some ground in the Chinese market— potentially offsetting any losses it faces in India.
Overall, the reshuffling of met coal trade flows is likely to have a negative impact on tonne-miles demand for bulk carriers. As U.S. exports shift from China to closer markets like India, and Australia redirects volumes to China, average sailing distances shrink. Meanwhile, Mongolia’s growing overland supply to China further displaces seaborne demand. However, the overall impact on tonne-miles will also depend on the balance between rising and falling import volumes. Global coking coal trade is expected to increase slightly in 2025—by around +0.8% y-o-y, driven mainly by India’s expanding steel sector. This modest growth may help soften the tonne-mile losses caused by shorter routes and overland shifts.
Data Source: Intermodal