Coal miners of Kuzbass are dissatisfied with the way Russian Railways transports their cargo
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Kuzbass complains about the reduction in coal exports in the western and southern directions: according to the governor of the region, Sergei Tsivilev, Russian Railways accepts no more than 60-70% of the agreed volumes for loading. The statistics of Russian Railways do not confirm this for the ports of the north-west, but indicate a decrease in the loading of export coal in the direction of the southern ports, this is due to an increase in the transportation of passengers and non-coal cargo. According to experts, in the western direction of exports, coal prices have fallen noticeably under the pressure of low gas prices, which may put pressure on the margins of deliveries from small Kuzbass exporters that do not have their own wagon fleet and port facilities.
Coal miners of Kuzbass, traditionally dissatisfied with the passage of export cargo flows by rail to the east, are now complaining about the pace of coal export to the west and south. As the governor of Kuzbass Sergey Tsivilev said at a meeting of the State Council commission in the direction of “Energy”, JSC Russian Railways accepts for loading in these directions “no more than 60-70% of the volumes agreed, approved by the technical plans” (quote from TASS). This situation has been observed since April, he explained.
He was also dissatisfied with the pace of shipments to the east, recalling that on behalf of the President of the Russian Federation, 63 million tons should be exported from Kuzbass to the east, and the agreement with Russian Railways on guaranteed export is 53 million tons. “This is already minus 20 million tons in two years,” he said, adding that the situation is aggravated by lower prices both in the west and in the east. “Since the beginning of April, prices have decreased by one and a half times,” said Mr. Tsivilev.
Russian Railways, however, does not note a decrease in loading in the direction of the ports of the north-west, speaking only about problems in the south. As reported by Russian Railways, in five months 84.8 million tons of coal were exported, of which more than half – 45.1 million tons – to the east, which is 10% more than last year. “The shipment to the east is growing most rapidly from the regions with which, on behalf of the country’s leadership, Russian Railways has concluded agreements on the export of coal,” the monopoly states. “For example, Kuzbass, thanks to priority, increased loading in this direction by 19.5%, million tons. In the northwest, there is also a significant increase in coal – by 22.8% to 25.5 million tons. In particular, 18.4 million tons were exported from Kuzbass in this direction, which is 14.2% more than last year.
The results are worse in the ports of the south, where 13.3 million tons of coal were shipped in January-May, which is 11% less than a year earlier. Russian Railways explains this by the extreme intensity of traffic.
“The record volume of passenger traffic and the reorientation of other cargoes here: grain (growth by 2.5 times), fertilizers (growth by 16.2%) and others,” say the monopoly, noting that the total transportation of goods to the southern ports has increased by 1.2%, up to 40 million tons.
According to the current methodology, the quotas of specific consignors of Kuzbass for the supply of export coal to the east depend on the supply of coal to alternative directions to the east, according to the current methodology. If some of them deliveries to the northwest and south decreased in April-May, then this may affect the quota in the east direction for August.
Prices for thermal coal 6000 kcal on the basis of FOB Far East at the end of May were at the level of $128 per ton, says Boris Krasnozhenov from Alfa-Bank. At the same time, the prices for coal of similar grades on the basis of FOB Baltika fell to $83 per ton. Cheap gas, which is currently trading on spot in Europe at $270-300 per thousand cubic meters, is objectively replacing coal, the expert notes. “It can be assumed that at this level of prices in the western direction, small exporters in Kuzbass without their own wagon fleet and port facilities may face serious pressure on margins and a lack of stable demand from European consumers,” says Mr. Krasnozhenov. “Problems may also arise with the supply of cheaper low-calorie coal (5000–5500 kcal).
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