InvestorQ : Can you explain why Ultratech is keen to pay for Russian coal in Chinese Yuan?
Sam Eswaran made post

Can you explain why Ultratech is keen to pay for Russian coal in Chinese Yuan?

Moii Chavate answered.
1 month ago

During the week, an interesting deal was seen in terms of the restructuring of the deal. India’s largest cement company with an installed capacity of over 130 MTPA, Ultratech Ltd, imported a $25m consignment of coal from Russia. There is nothing really off the track about such imports, but what was unique was that the payment for the consignment was made by Ultratech in Chinese Yuan. Experts confirm that this is the first time that a Russian trade with India has ever been denominated in the Chinese Yuan.

The reasons are not far to seek. They cannot use the dollar route due to sanction and the rupee rouble pathway is yet to be set up. Russia already has a Yuan-Rouble pathway, which is what Ultratech is using to import coal, while circumventing the American sanctions. The Yuan payment allows the importer to circumvent any kind of US restrictions on Russia and does not get the US dollar or the US banks into the picture in any way. Since Russia is offering huge discounts, Ultratech gets much needed coal at relatively cheap rates.

Here is how the deal makes sense to Ultratech. Cement companies have been hit hard by power cost hikes due to higher coal prices. This helps them to contain operating costs in a big way. It suits China that the world is accepting its Yuan as a standard for payments, a privilege that was only enjoyed by hard currencies like the US Dollar, Euro, UK Pound and the Yen. In short, Russia is able to still coal, Indian companies are able to get lower costs and in the process China also globalizes its currency ambitions.