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Japan takes chunk out of dependence on Russian coal

Japan’s reliance on Russian coal has significantly reduced as power companies and other buyers sought alternative sources such as Indonesia and South Africa. According to the Ministry of Finance trade data, Japan imported 73% less thermal coal from Russia in February than a year earlier, and Russian coal accounted for just 2% of total imports, down from 9% the previous year. Japan has made progress toward the G7 leaders’ 2022 pledge to phase out or ban this trade, which has been a source of revenue for Moscow’s war on Ukraine.

Japan’s imports of thermal coal from Russia for April 2022 to February 2023 totaled about 6.5 million tonnes, down 45% from the previous year, while imports of Indonesian coal grew 28% and those from South Africa grew about sixfold. By contrast, imports of Russian liquefied natural gas were only down about 20% on the year in February, reflecting the greater difficulty of finding alternative sources of LNG.

Power companies have played a major role in Japan’s effort to reduce dependence on Russian coal, which was the country’s second-largest supplier in fiscal 2021. Some utilities, such as JERA and J-Power, have stopped procuring Russian coal or plan to gradually reduce their procurement to zero by promoting alternative sources. While the cement industry, another energy-hungry sector, has been slower to embrace change, industrywide, Russian coal accounted for nearly half of total imports in fiscal 2021. Japan faces challenges in procuring high-grade thermal coal because of the limited number of countries that export it.

Despite easing international prices for thermal coal this year, Australian coal was hovering at $200 a tonne in late February, nearly double the level of the first half of 2021. The International Energy Agency estimates that global coal demand reached a record high of about 8 billion tonnes in 2022, up 1% from the previous year. However, in the longer term, global production is expected to slow as mine investment languishes in the transition to renewable energy and alternative fuels like hydrogen and ammonia, both areas in which Japan is making supply chain investments.

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