Russia switches to exporting expensive coal

Russia is reducing supplies of thermal coal, but increasing exports of metallurgical coal, which is more expensive. Experts say that this not only brings in more money, but also forms a long-term bond between the buyer and the supplier’s products.

The Russian Ministry of Energy expects that coal production of 440 million tons and exports of 220 million tons of coal will remain at the same level this year and next. At the same time, Russian suppliers are already increasing sales of more expensive metallurgical coal abroad.

Thus, its supplies in January-November increased by 21% – to 40 million tons. But energy shipments decreased by 8.5% – to 96.4 million tons. The publication notes that China remains the main market for Russian coal (23.6 million tons), but India is catching up, which increased purchases of coking coal from Russia by 2.2 times – to 5.2 million tons.

While Europe banned imports of Russian coal last August and is seeking to reduce consumption of any fossil fuel, India is taking a different path. The International Energy Agency predicts that the country will increase consumption from 81 million tons per year to 104 million tons.

As noted in Kommersant, the increase in coking coal supplies from Russia was mainly ensured by the Elginskoye deposit in Yakutia. This year, production at the field is planned to increase from 20 million tons to 23 million tons.

Alfa Bank's Boris Krasnozhenov said coking coal prices remain fairly high at more than $320 per tonne FOB for premium Australian grades of coking coal.

“The positive performance of coking coal prices is due to rising steel production in India, replenishment of inventories by Chinese consumers ahead of the Lunar New Year and limited supply from Australia due to climate conditions,” the analyst said.

Independent industrial expert Maxim Khudalov, in turn, notes that the news about the increase in supplies of metallurgical coal is positive, since the increase in sales of metallurgical coals (coking and PCI coals) is a more complex process than an increase in supplies of thermal coals, which is decided by price preferences.

“Moreover, entering the metallurgical coal market forms a long-term tie between the buyer and the supplier’s products. This allows in the future, when market conditions improve, to increase the margin of supply of metallurgical coal to new markets,” says Maxim Khudalov. He adds that the drawdown in thermal coal rather reflects price dynamics, since many directions have become unprofitable due to the strong growth of transport, and especially sea and transshipment components.

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