Though Russia produces only around 5% of the world’s coal, it counts as Japan’s second-biggest supplier of the fuel. Russian coal imported by Japan has doubled in volume over the past decade.
Russia accounted for 15% of Japan’s coal imports in 2020, according to Japan Oil, Gas and Metals National Corp, the state-owned resource explorer known as Jogmec. Australia is the top coal exporter to resource-poor Japan at 67%.
While Europe has taken steps to reduce coal use, Russia has expanded exports to Asian markets where demand is growing.
Japanese utilities now are rushing to find replacements for Russian coal. Jera, the fuel importer jointly owned by Tokyo Electric Power Co Holdings and Chubu Electric Power, brings in roughly 20 million tons of coal yearly.
More than 10% of that coal originates from Russia.
“At this point, there is no impact to coal procurement,” a Jera representative said. Russian coal “represents a portion of the types that we receive under contract, and we’ll procure non-Russian varieties going forward.”
Kyushu Electric Power, which serves western Japan, procured 7% of its coal from Russia during fiscal 2020. The company is diversifying its supplies.
“From the viewpoint of Russian sanctions and mitigating supply risks, we’re halting procurement of coal from Russia and switching to supplies from other regions,” a Kyushu Electric representative said.
Chugoku Electric Power, which also serves parts of western Japan, acquired no Russian coal during the January-March quarter of this year. Russia had supplied 9% of the utility’s coal during the three quarters through December 2021.
Coal accounts for over 30% of Japan’s power supply mix, making it a critical energy source on par with liquefied natural gas.
From December to February, the import price of coal averaged ¥21,671 per ton, trade statistics show, up two and a half times from the year-ago period.
If both Europe and Japan seek substitutes for Russian coal, the demand-supply balance will tighten and utilities will face higher procurement costs, putting upward pressure on already elevated electric bills.
Nippon Steel, which imports some of its coking coal from Russia, says there will be no impact on production in the short term due to inventory in place.
The company plans to replace Russian coking coal with alternative supplies if the Ukraine war becomes protracted.
JFE Steel, which sourced about 18% of its coking coal from Russia in fiscal 2020, is considering alternative supplies from Australia and other producers.
Japanese companies that earlier decided to rethink Russian coal in response to the invasion of Ukraine are hurrying to take action, knowing that more expensive alternative sources may slice into earnings.
Paper manufacturers use large amounts of coal or oil in their production processes, putting those that buy Russian under pressure to switch as well.
Cardboard maker Rengo will cease imports of Russian coal by summer, switching to Indonesian offerings. The company uses an average of 140,000 tons of coal annually in its manufacturing – all of it coming from Russia.
Ichiro Hasegawa, an executive vice president at Rengo, said the company will refrain from importing Russian coal since the country has engaged in armed conflict.
“If there’s no change in policy in regards to humanitarianism, then resuming purchases is out of the question,” Hasegawa said.
Oji Holdings, which also makes paper products, will withdraw from Russian coal as well. The company is halting shipments from Russia, with March’s cargo being the last.
Oji is switching chiefly to Australian coal. Disruptions in logistics and finance contributed to the uncertainty of maintaining supplies from Russia.
Paper companies have announced price hikes since November due to higher fuel, material and transportation costs. Some in the industry suggest that further increases are needed.
The cement industry is impacted, too. Japanese leader Taiheiyo Cement uses two million tons of coal a year in manufacturing. Russia supplies 60% of the coal, but the company will expand procurement from other sources.
Sumitomo Osaka Cement relied on Russia for 80% of its coal, but is now expanding the share from Australia. Both cement companies are raising prices, but those have largely failed to offset sharply higher coal costs.