Indostal – Newspaper Kommersant No. 166 (7367) dated 09/09/2022

In July-August India seriously increased its purchases of coal and steel from Russia. Deliveries of thermal coal soared especially strongly, reaching 1.8 million tons in August, while coking coal fell due to sanctions fears of local metallurgists, mainly part of international holdings. According to analysts, exports from Russia to India will continue to grow on the back of increased demand for steel in the country and high costs for local producers.

Russian producers of coal and ferrous metals, forced out of Europe by sanctions and embargoes, are increasingly reorienting supplies to the Indian market. According to the CoalMint agency, imports of Russian coal into the country reached a record 2.3 million tons in August. Including 1.8 million tons of thermal coal were delivered, as India is experiencing a shortage of its own coal, and Russian cargo is offered at competitive prices.

At the same time, imports of coal for metallurgy – coking and pulverized coal fuel (PCI) – decreased by July by 60% and 66%, to 150 thousand and 200 thousand tons, respectively. Indian steel mills, which are mostly international holdings, have avoided buying Russian coal out of fear of potential sanctions, according to CoalMint. Formally, there are no secondary sanctions on Russian coal, while the United States, Great Britain, and since August 10, the EU countries have abandoned it.

The agency forecasts that Russian thermal coal exports to India could pick up in September and October, driven by robust domestic demand.

As for coking coal, supplies are expected to decrease in this category, but the main factor will be the difference in price with Australian coal.

Although Russian coal companies are actively looking for and finding, for example, in India, a replacement for the European market, the decline in coal production in the Russian Federation is accelerating. “Since the beginning of the year, we have observed a decline in production by about 0.7%. At the end of the year, it will already be about 6% compared to the level of 2021 due to the impact of the embargo on the supply of coal to the EU, ”said Nikolai Shulginov, head of the Ministry of Energy on September 5 (quoted by TASS).

Deliveries of Russian steel to India are also growing.

According to the Indian customs, imports of ferrous metals (TNVED 72) from Russia in July in annual terms increased five times, to 29.7 thousand tons. The department reflected the start of purchases of hot-rolled steel in Russia, which had almost never been supplied before. The first batch, as Kallanish Commodities reported, was shipped by Alexei Mordashov’s Severstal, which is under blocking sanctions. At the end of July, it delivered 24 thousand tons of steel to India under a contract concluded in dirhams or yuan.

According to Argus, India as a whole increased its imports of finished steel in August by 11.8% compared to the same period last year, to 442 thousand tons. The country became a net steel importer in July for the first time since January 2021. Deliveries increased precisely due to cheap offers from Russia and South Korea.

But, as with coal, alternative markets have not completely replaced the West: in July, according to the World Steel Association, Russia cut steel production by 13.2%, to 5.5 million tons, on an annualized basis. At the beginning of summer, NLMK expected a 15% decrease in total steel output in the country at the end of the year.

India is now the fastest growing major steel market in the world, says Airat Khalikov, director of the Gazprombank Center for Economic Forecasting. The country has been successfully implementing a real estate construction program for many years, while the local market does not yet accumulate volumes of unsold housing, as in some neighboring countries. In addition, the expert notes that India has a relatively high cost of steel production due to the low quality of local coal. Therefore, according to Mr. Khalikov, if Russian metallurgists do not face obstacles in the form of import duties, they can increase supplies to India of a wide range of products – from coking coal to rolled steel.

Evgeny Zainullin