Maguire: Coal traders may be the rare winners of Trump's tariff war.

Coal traders may be the only ones to benefit from President Donald Trump’s new, drastic tariff regime. The new tariffs add at least 10% on the price of almost all goods imported into America.

Energy providers in Asia, who have been hit by some of the most expensive new U.S. Tariffs, will be under pressure from their customers to reduce power costs. This includes many of the largest goods producers around the world.

Asia's utilities can help manufacturers maintain some sales, even after the tariffs are implemented, to the largest importer in the world, by lowering the operating costs of factories.

To produce the most affordable power, Asian power producers must increase the use coal and reduce the use of more expensive fuels.

This would be great news for the coal miners and traders in the area, but bad news for the regional emission levels which will continue to rise as more coal is burned for electricity.

HARDEST HIT

The new U.S. Tariff Levels are most affecting the Asian manufacturers, with China and Vietnam being hit by new tariffs of 34 and 44 percent, respectively.

China and Vietnam produce a large share of electronic, clothing, furniture, and sporting goods purchased by U.S. customers.

Indonesia (32%), Cambodia (49%) Malaysia (24%), and the Philippines (17%) are other Asian countries with large manufacturing bases focused on exports that were also hit by steep new tariffs.

Due to the soft consumer demand in the U.S., the companies won't be able pass on the increased costs caused by tariffs without a significant drop in sales.

Many companies will instead try to absorb some of the tariff impacts themselves and find ways to cut costs to maintain a profit margin.

Local governments will probably be keen to help in this search for cost savings, as they will want to maintain jobs in the manufacturing industry despite the new hostile trading environment.

COAL FIX

Coal traders are willing to assist in cost-saving efforts by providing power producers with additional volumes of thermal coal used for electricity production.

According to Ember, coal is the cheapest, largest, and most efficient source of thermal energy production in Asia. It will account for 56% of regional electric supply in 2024.

Natural gas has replaced some coal in certain countries as part of the effort to reduce pollution. It accounted for 10% of regional electric supplies last year.

In the future, coal is likely to see a revival as utilities prioritize cost above all else, in an attempt to help manufacturers weather a tariff storm.

This will mean that coal traders can supply higher volumes to coal burning hubs in the region more frequently.

According to Kpler, global trade intelligence company, the largest coal consumers in the world are the manufacturers of the region.

In 2024, coal imports will have increased in nearly all major Asian manufacturing hubs, including China (10%); Vietnam (28%); Cambodia (26%); the Philippines (5%); and Malaysia (3%)

The imports to these countries also reached record levels in 2024 despite the fact that shipments to other countries continue to fall.

The combination of increasing demand from a small group of consumers is a good thing for traders of coal, as they can optimize their shipments towards a limited number of destinations.

The coal volume shipped to Asia will probably increase in 2025 due to the cost-cutting initiative triggered by Trump’s new tariffs.

The region's power grid is trying to reduce power costs, so coal traders should expect to see both growth in volume and margins.

These are the opinions of the author who is a market analyst at.

(source: Reuters)