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Russia coal export growth limited by rail problems

Steel News - Published on Thu, 05 Apr 2012

Reuters reported that Russia\'s coal exports are likely to grow by less than a tenth to around 80 million tonnes at most this year largely because of rail bottlenecks and the gain could be even less in a likely environment of disappointing prices.

The world sixth-largest coal exporter after Indonesia, Australia, Colombia, South Africa and the United States may see its share of the export market shrink slightly if Asian growth boosts global demand, but not enough to fall in the ranking.

Mr Rudi Vann lead analyst with Wood Mackenzie said \"Russia is sixth in the world with 4% of global supply but will only have relatively small-scale growth in the overall picture. He said that Russian ports are close to capacity with no new expansions scheduled this year. There is a bottleneck to increase supply to the market.\"

The costs of mining and railing coal to port in Russia are the highest in the world at USD 80 to USD 90 a tonne FOB which compares with delivered Europe prices of USD 96 at present. Russian coal is currently trading at USD 90 a tonne FOB Baltic and Russian ports. Up to USD 110 is achievable in specific Asian markets, but the Russian rail system has reached its capacity for moving coal to the east from the main producing region of Kuzbass in central Siberia.

With prices uncomfortably close to breakeven point for many exporters, companies are looking for every possible cost saving and way of adding value to their product. The social and political implications of cutting production and jobs in the remote mining regions, make it impossible to do so even when selling at a loss.

Company sources said even so, last year Russia biggest miner SUEK managed a 350% rise in net profit to RUB 5 billion due to a variety of measures to cut costs including selling more coal domestically and focussing on premium-paying markets.

They said major exporters have already sold forward almost all of their production for this year, leaving a small amount of spot tonnage to sell in markets that pay the most.

Coal exporters estimated that if prices rise in the second half of the year, Russia total seaborne thermal coal exports are likely to increase to around 80 million to 82 million tonnes, but the figure could be close to last year 75 million if prices remain at the current level.

The major exporter said \"If prices rise there is some potential for expansion in the Far East, with coal from East Siberia. If prices are good, it could be in the low 80s, up to 82 million tonnes seaborne.\"

They said a rise in sea freight rates also could benefit Russian exporters, who gain a competitive edge in sales to countries relatively nearby in Scandinavia, Turkey and Japan.

Source - Reuter


Posted By : admin on Thu, 05 Apr 2012
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