Coal floated more energetically – Newspaper Kommersant No. 17 (7462) of 01/31/2023

By providing discounts, Russian coal miners increased deliveries to South Korea by 24% in 2022, displacing Australia, the main player in this market. The growth in deliveries was facilitated by a short transport distance from the Far East, as well as relatively affordable freight rates, which periodically made it possible to send goods to South Korea even from the ports of the European part of the Russian Federation. However, according to experts, the situation on the thermal coal market is changing: prices are falling, and in Europe demand is declining due to warm weather.

In 2022, Russia increased exports of thermal coal to South Korea amid a reduction in supplies from Australia, which is the main source of coal for this country, follows from the December report of Argus Russian coal. According to the pricing agency, buyers from South Korea began to increase imports from Russia from mid-2022, importing about 2 million tons of thermal coal monthly. According to South Korean customs data, in 2022, imports of all types of coal from Australia decreased by 25% compared to 2021, while Russia increased supplies by 24%, to 26.5 million tons of coal.

At the end of 2022, coal production in Russia increased by 0.3%, to 442 million tons. Coal exports fell by 7.6%, Deputy Prime Minister Alexander Novak reported in January of this year. Earlier, the Ministry of Energy reported that in 2021, exports amounted to 223.4 million tons.

The increase in exports to South Korea, which Russia classifies as an unfriendly country, became possible due to discounts, convenient delivery times and favorable freight rates. At the end of December, 6,000 kcal Australian coal on FOB terms cost $409.5 per ton, while Russian coal was offered to South Korean consumers more than twice ($244 per ton) cheaper. Russian coal with loading in January cost $170-172 per ton in one of the ports of the Far East on CIF terms. According to Argus, citing a market participant, Russian coal producers continue to offer high-calorific coal at a discount to South Korean consumers, as they are ready to start fulfilling their purchase plans for the second quarter of 2023.

Another advantage of Russian coal is the short delivery time to South Korea from the Russian Far East and rather low freight rates on this route. Thus, in December, the freight rate for a capesize vessel from the port of Vanino was $4 per ton, $5.4 per ton for a Panamax vessel and $9.4 per ton for a handysize vessel. Some South Korean consumers buy coal even in the ports of the North-West of the Russian Federation (Ust-Luga, Vysotsk, Murmansk), as well as in Taman. “Coal deliveries to the ports of the Russian Far East may be limited as Russian coal suppliers face difficulties in transporting coal by rail to the east. So in 2022, we delivered several cargoes of Russian origin from the port of Taman,” a Russian coal trader told Argus. According to coal exporters, the freight rate for capesize vessels from the port of Taman to South Korea last week was estimated at $46-50 per ton. Argus names SUEK, Kuzbassrazrezugol, SDS-Ugol and Stroyservis as the main suppliers of Russian coal to South Korea.

However, in 2023 the situation becomes less rosy. According to Boris Krasnozhenov from Alfa-Bank, coal prices in the Asian market on January 30 fell to their lowest level since April last year: the price of thermal coal on an FOB Newcastle basis fell below $300 per ton. The European market is also seeing negative dynamics: coal imports in January are likely to fall by about 30% in annual terms and by 23% by December, according to Kpler. The decline in consumption and prices is associated with warm weather in Europe, the analyst notes, but, in his opinion, it is still difficult to talk about a systemic drop in demand for coal.

Evgeny Zainullin