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Coal exports from Russia in January 2024 decreased by 8% compared to January last year, amounting to 14.6 million tons. This was reported to Vedomosti by two sources familiar with the statistics of the Ministry of Energy.

We are talking about the supply of all energy and metallurgical (coking) coal, they explained. The rate of decline turned out to be the same for both types: sales of thermal coal decreased by 8.2% and amounted to about 11.9 million tons, coking coal – by 8% to 2.7 million tons.

All major importers, including China, India and Turkey, have reduced purchases of Russian coal. According to sources, the largest drop in January was recorded for supplies to India and Turkey, which sank by 55 and 47%, respectively. 1.4 million tons of coal were delivered to each of these countries in a month. China reduced imports of Russian coal by 10.5%, purchasing 3.8 million tons.

Japan practically curtailed coal purchases in Russia in January – they fell by more than 60 times and amounted to only 14,000 tons. Exports to South Korea decreased by 33% to 472,000 tons. There were no deliveries to Morocco in January at all, although in January last year they amounted to 453,000 tons.

According to the interlocutors, only Belarus significantly increased imports of Russian coal in January: Supplies increased 76-fold year-on-year to 757,000 tons. According to one of the interlocutors, consumers in "a number of Asian countries" also increased purchases, where about 957,000 tons (+19%) were delivered in January. He does not specify which countries these are.

Despite a significant decrease in export supplies, in January 2024, coal production in the Russian Federation showed positive dynamics, the interlocutors say. It increased by 1.7% by January 2023 to 35.8 million tons. This could be facilitated by an increase in consumption in the domestic market to 17.3 million tons (+1%), one of the interlocutors believes. According to him, it was mainly provided by increasing demand from coal-fired thermal power plants to about 9 million tons (+1.3%). In addition, the source adds, the volume of coal that was mined but not shipped to consumers has increased.

The restructuring of logistics chains and the search for new markets for Russian coal miners began back in 2022, after the European Union (EU) banned the import of Russian coal. Russian companies have launched supplies to Asia, ensuring a symbolic 0.3% increase in coal production compared to 2021. Exports in 2022 sank by only 1% and amounted to 221.2 million tons. In 2023, the decline was already more noticeable and, according to Russian Deputy Prime Minister Alexander Novak, amounted to 3.7% by 2022 - 213 million tons were shipped abroad. Production last year sank by 1.3% and amounted to 438 million tons. According to the analytical company Kpler, the share of Asia (including Turkey and Asian countries of the Middle East) in Russian coal exports increased from 84% in 2022 to 95% in 2023, and the share of Europe decreased from 11% to 1%.

Boris Krasnozhenov, Head of the Securities Markets Analytics Department at Alfa Bank, draws attention to the fact that the drop in exports in January occurred in ports in southern Russia (the Azov-Black Sea basin) and the Baltic Sea. At the same time, shipments through Far Eastern ports, according to him, were "approximately at the level of January 2023," and shipments through border crossings to China even increased by 42% year-on-year and amounted to almost 1 million tons. Krasnozhenov associates the decrease in transshipment in the southern ports with high tariffs in Taman (see the publication of Vedomosti dated February 26).

Nikolay Dudchenko, an analyst at Finam, notes that the reduction in coal imports by India is due to the "overstocking of the country's market" against the background of record production volumes. Krasnozhenov explains that the production of energy coal in the country in January increased by 10% year-on-year. Alexander Kotov, head of consulting at NefaResearch, adds that Indian consumers preferred coal from South Africa because of its lower price. According to Kotov, in 2024, coal imports to India will decrease to 160-170 million tons from 176 million tons last year.

According to Krasnozhenov, Chinese companies could reduce imports against the background of the Chinese New Year (celebrated from February 10 to 24) and in anticipation of lower prices. According to the ICE exchange, in January, futures for energy coal in Newcastle, Australia, which is a benchmark for prices in Asia, were trading at $115-132/ton on a FOB basis (with loading on a ship), on March 3 they were at the upper limit of this range. The reduction in imports of Russian coal by China may also be due to an increase in reserves in the country, Dudchenko points out.

Kotov adds that the profitability of coal supplies to China has decreased due to the introduction of a 6% import duty in China since January, as well as due to an increase in the cost of sea freight and port transshipment in January.

The decline in coal exports to Turkey, according to Kotov, is due to the problems of transporting coal by rail to the ports of southern Russia. According to railway forwarders, coal shipments to southern ports in January decreased to 1.6 million tons from 2.2 million tons in December, he explains. Deliveries through the southern ports were also hampered by the rates at the terminal from ECO in Taman and the stormy situation in the Azov and Black Seas, the expert adds.

The volume of shipments to South Korea and Japan decreased last year. This is due to "political factors," Kotov believes. At the same time, the cessation of Russian coal exports to Morocco, in his opinion, is explained by the lost price competition to suppliers from the United States.

According to Alfa-Bank forecasts, there will be no significant drop in coal exports from Russia in 2024. Kotov from Nefa Research believes that the volume of supplies abroad by the end of the year will amount to less than 200 million tons of coal. Thus, if this forecast comes true, exports will drop by 6%. According to Kotov's estimates, US sanctions against SUEK and Mechel create risks of non-export of up to 30 million tons of coal this year.

Dudchenko also believes that 2024 will be a difficult year for the Russian coal industry due to floating export duties imposed by the government on March 1, linked to the dollar exchange rate (they will amount to 4-7%. – Vedomosti). According to Kotov, due to the unprofitability of exports, coal stocks in Kuzbass and other coal regions will grow.

Kirill Rodionov, an energy expert, also draws attention to the risks of stagnation of energy coal exports from Russia in the future, including due to the growth of investments in coal mining in China, which doubled from 2017 to 2023 to $105 billion per year. According to Rodionov, coking coal exporters have more positive prospects, primarily due to the growing demand in India from the metallurgical sector against the background of the urbanization of this country.

The press service of the Ministry of Energy told Vedomosti that according to the January indicator, "it is too early to judge any significant changes in exports." According to the ministry's forecast, by the end of 2024, the volume of exports and production is planned to remain at the level of last year. Russian coal is still in demand on world markets, primarily in the countries of the Asia-Pacific region, the Ministry of Energy emphasizes.

Source: https://www.vedomosti.ru/business/articles/2024/03/05/1023677-rossiya-snizila-eksport-uglya?utm_campaign=newspaper_5_3_2024&utm_medium=email&utm_source=vedomosti