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Japanese companies are accelerating the replacement of Russian coal with Australian supplies

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Australian coal prices remain strong as demand for coal from Europe and Japan to replace Russian coal continues to change trade flows. Market participants said that the dominant share of Australian coal entering Japan could further increase given the proximity of origin as well as existing trade flows.

Japanese companies are accelerating the replacement of Russian coal with Australian supplies

Japanese utilities and manufacturers are stepping up efforts to find alternative supplies to Russian coal from Australia, Indonesia and Vietnam, Japan's Ministry of Economy, Trade and Industry announced May 17.

"Energy companies and producers will step up their efforts to replace Russian coal with alternative purchases from Australia, Indonesia and Vietnam, among others," according to documents submitted to the METI Subcommittee on Electricity and Gas Policy on May 17.

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Japanese producers that use thermal coal for their own power generation have more than a month's worth of supplies, but some producers are heavily dependent on supplies from Russia.

Ministry documents say that Japanese steelmakers have relatively little dependence on Russia for coking coal, but there is a higher dependence on certain Russian grades of coal, and steelmakers need to consider alternative purchases.

According to the Ministry of Finance, in 2021, Russia was the second largest supplier of thermal coal and the third largest supplier of coking coal to Japan, sending 12% and 8% of the total imports of thermal coal and coking coal to the country, respectively.

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Japan, the world's third-largest coal importer, announced on April 8 its decision to phase out Russian coal imports as part of a commitment by the G7 leaders. Thermal coal accounts for 60% of coal consumption in Japan, and coking coal accounts for 40% of coal use.

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