For all corners Asia – Kommersant

Russian coal, which interested Asian buyers last year with its discounts, is losing its former attractiveness. Prices are falling on the world coal market, but Russian coal is getting cheaper more slowly than its counterparts from South Africa and Colombia. Some traders are already turning cargo from Europe, where South African and Colombian coal is replacing Russian raw materials, to China. This could lead to higher discounts and a decrease in seaborne exports of Russian coal, but analysts believe that he will still win the competition on cost.

Prices for Russian thermal coal 6000 kcal in Asia are less attractive than those from South Africa and Colombia, writes Argus. According to the pricing agency, thermal coal prices have been declining in the past few weeks, but Russian coal is getting cheaper more slowly. From April 21 to May 12, FOB Vostochny energy coal decreased in price by 5% to $124.3 per ton. South African coal FOB Richards Bay fell 19% over the same period to $107/tonne. The premium with which Russian coal is traded against Colombian coal rose from $6 in March to $13.5 in May.

Price changes have already affected the market. Swiss traders have begun moving Colombian cargo from Europe to China, writes Argus. South Africa has already ramped up shipments to China, South Korea, Japan and Taiwan. Recall that South Africa and Colombia significantly increased exports to Europe after the embargo on Russian coal was introduced (see Kommersant dated October 13, 2022).

It is possible that some buyers of Russian coal will try to insist on increasing its discount to the benchmark, which in Asia is Australian coal. South Korean clients of Russian companies note that the discount on Russian coal, adjusted for freight, should be above $15-20 per ton to justify the geopolitical risk of buying Russian products.

A negative consequence of the decrease in the competitiveness of coal from the ports of the Far East may be a decrease in sea exports. From May 1 to May 16, Russian ports exported 7.2 million tons of thermal coal, compared with 8.4 million tons in the same period in 2022, according to Argus. At current rates, according to the results of the month, exports in May will decrease by 17% in annual terms. If Russian exports reach 13.5 million tons in May, then exports in the first five months of 2023 will set a record level of 68.9 million tons, compared with 61.8 million tons in 2022 and 62.1 million tons in 2020. reports Argus with reference to its data. According to Kommersant, coal transshipment in Russian ports in January-April this year increased by 18.3%, to 69.9 million tons. The largest export destinations are China, South Korea, Türkiye and Taiwan.

Coal prices are falling across all major markets as European spot gas prices decline, pushing coal out of the power generation sector, says NRA’s Sergey Grishunin. Now the API#2 index (CIF Rotterdam) is estimated at $114-118 per ton and tends to decrease. In this regard, deliveries from Colombia and South Africa, which are getting cheaper faster than their Russian counterparts, can really pose a threat to Russian products in Asian markets, the expert believes. However, in his opinion, the potential for a negative impact on Russian exports from these suppliers is limited, since the cost of their coal is higher, and they will not be able to supply products to Asia at prices below $100-110 in Chinese ports. At the same time, the weakening ruble plays into the hands of Russian coal miners, so they will be able to maintain their volumes through a more flexible pricing policy. “Nevertheless, the situation on the market is unfavorable, and coal miners will have to tighten their belts this year, since the downward trend in prices is unlikely to change in the near future,” the expert believes.

Evgeny Zainullin