Coal rises in price in spring – Kommersant
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The Ministry of Industry and Trade observes a rise in prices for coking coal in Russia in April by 30%, which led to an increase in the cost of sheet metal. The issue is becoming more acute as, against the backdrop of the start of the construction season, domestic prices for rolled metal are growing, which irritates developers and the Ministry of Construction. The Federal Antimonopoly Service has not yet confirmed the increase in coking coal prices. According to experts, coking coal prices in Russia follow the dynamics of world quotations, taking into account the weakening of the ruble in March-April.
In April, prices for coking coal on the domestic market rose by 30% to 13.5 thousand rubles, Kommersant was told at the Ministry of Industry and Trade. “The indicated rise in prices led to an increase in the cost of production of sheet metal products by 1.5–2 thousand rubles. per ton,” they added. Recall that on March 20, Deputy Head of the Ministry of Industry and Trade Viktor Yevtukhov reported that the department applied to the FAS in connection with the expected increase in prices for coking coal by 40%. The reason for the rise in prices, the official said, is that coal companies still tie contracts on the domestic market to world prices, which is “categorically unacceptable in the current conditions.”
The Federal Antimonopoly Service told Kommersant that the coal companies did not confirm to the regulator the information about the increase in coking coal prices by 40% and reported that negotiations on the sale price had not yet been completed. FAS also sent inquiries to metallurgical companies that consume coking coal. “To date, the requested information has not been provided in full, while there have been no statements from these companies about an increase in prices for coking coal,” the FAS noted. The metallurgical and coal companies did not provide comments.
The issue of rising prices for metal products was again raised in early March. Minister of Construction and Housing and Utilities of Russia Irek Fayzullin said that the department had applied to the Federal Antimonopoly Service with a request to check the validity of the increase in prices for rebar. However, following a meeting with First Deputy Prime Minister Andrey Belousov, it was decided to continue monitoring prices for rolled metal products and not introduce strict restrictions (see Kommersant dated April 6).
Although the government would like to see coal companies move away from using world quotations in the domestic market, the MET on coking coal is charged in relation to the global market: the rate is set at 1.5% of the average coal price in accordance with the SGX TSI FOB Australia index Premium Coking Coal, whereas previously a fixed amount of 57 rubles was used. per ton. This, among other things, made it possible to double tax revenues from the coal industry in 2022, to RUB 360 billion.
The increase in prices for coking coal in Russia in April may average 25%, according to a review by Metals & Mining Intelligence. Demand is supported by the growth in coke production and the growing utilization of blast-furnace capacities in the Russian Federation, which, according to the agency, is at the level of 90-91%. “The strong depreciation of the ruble against the US dollar in March-April increased the ruble alternatives for Russian exporters. At the same time, coal quotations on the world market continue to decline, which limits the further growth of the export alternative,” the review says.
According to Boris Krasnozhenov from Alfa-Bank, the estimate of the Ministry of Industry and Trade of the growth in the cost price in rubles looks correct. “As for the price level, it is usually set according to the “netback parity” principle, when the price for the domestic consumer is calculated based on the FOB Australia price for premium hard coking coal, minus rail transportation, transshipment costs at the port and a possible discount for quality” says the analyst. Prices for premium coking coal from Australia are around $280 per ton FOB. Transshipment in the Far Eastern ports of Russia is $22-25 per ton. Transportation of a ton of coal by rail from Kuzbass to the Far East is about $50 per ton. “According to our estimates, the discount on quality can be about 10%. Using these parameters and the exchange rate at the level of 75 rubles. per dollar, the internal price of coking coal on the FCA basis is about 13.5 thousand rubles. per ton,” says Boris Krasnozhenov.
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