“Northern Star” Trotsenko began to supply coal to China

The Severnaya Zvezda company (part of Roman Trotsenko’s AEON holding) has begun industrial coal mining at the Syradasayskoye deposit in Taimyr and the supply of products to China. This was announced to Vedomosti on the sidelines of the Krasnoyarsk Economic Forum (KEF-2023) by Oleg Demchenko, Chairman of the Board of Directors of Severnaya Zvezda.

According to him, in October 2022, the company sent the first 100,000 tons of coal to China, and now the second export batch is being prepared. Demchenko added that so far contracts for coal supplies have been concluded “only with Chinese buyers.” But the company, according to the top manager, plans to deliver to the domestic Russian market.

Demchenko added that “as such, there is no design level of coal production” at the deposit. The company also suspended a project to build an enrichment plant due to problems with the supply of equipment associated with increased sanctions after the start of the NWO in Ukraine.

“The factory has been suspended for now. Part of the equipment was purchased in America, they returned the money. We are reviewing the factory design, [сроки] move a little,” said the top manager. Understanding the construction time, according to him, will be “by the next new year” (by the beginning of 2024 – Vedomosti).

Demchenko added that the total amount of investment in the development of the Syradasayskoye field has not increased and “may even decrease.” “The economy itself [проекта] will change significantly, the equipment, the scheme of transportation will change. Previously, we hoped that there would be transshipment in European ports, but they are now closed. [для российских судов]”, he explained.

The project includes the construction of a coal mine with a capacity of 5 million tons per year at the first stage and 10 million tons per year at the second stage at the Syradasayskoye deposit, an enrichment plant for the production of coal concentrate of coal grades KZh, K and KO. The Yenisei seaport, which will be able to transship up to 10 million tons per year, and the Taimyr airport should also be built. The volume of investments in the project until 2025, when it should reach its design capacity, was previously estimated by Severnaya Zvezda at 45 billion rubles. Trotsenko also said that it is planned to complete the project of creating a coal cluster by 2040.

The press service of the government of the Krasnoyarsk Territory announced the start of work on the construction of an enrichment plant at the Syradasayskoye field in December 2021. In April 2022, the general director of Severnaya Zvezda, Stalbek Mishakov, stated that the implementation of the project “is proceeding in accordance with the approved schedule.”

In March 2022, the U.S. authorities, in response to Russia’s NWO in Ukraine, banned new investments in the Russian fuel and energy complex, including coal mining. The EU embargo on the import of Russian coal has been in effect since August 10, 2022. Russian coal companies are forced to redirect significant volumes that Europeans have abandoned to the Asian market.

Mishakov said in April 2022 that Severnaya Zvezda is considering exporting products to China in 2023, and is also negotiating with potential buyers from Turkey, India, Vietnam and Brazil. He also noted that in the context of sanctions and cargo blocking in Europe, the company is considering the possibility of selling up to 100% of its products on the Russian market due to the shortage of grade K coal in the country and its competitive cost.

Vedomosti sent clarifying questions to the press service of the Northern Star.

Coking coal production in Russia in 2022, according to Rosstat, amounted to 105 million tons (+4.5% compared to the previous year). As Vedomosti previously wrote, exports of coking coal for 11 months of 2022 amounted to 30.3 million tons (+47% compared to the same period in 2021).

Head of Analytics Department for Securities Markets Alfa Bank Boris Krasnozhenov believes that Severnaya Zvezda will be able to maintain the original project parameters. “Construction of an enrichment plant is necessary. Taking into account the presence of Zh (fat), K (coke) and OS (lean-caking) coal grades in the reserves of the Syradasayskoye deposit, it is possible to provide buyers with a full range of products to create high-quality coal charge,” the expert added. He also drew attention to the fact that “now there are almost no new large projects in the coking coal segment in the world.”

Mikhail Burmistrov, General Director of Infoline-Analytics, notes that the export of concentrate is more economically profitable than raw coal. The company, in his opinion, will maintain the design capacity of the concentrator, but its construction “may take longer.”

Sergey Grishunin, managing director of the NRA rating service, notes with reference to data from SunSirs Commodity Data Group that prices for imported coking coal in China have remained stable since the beginning of the year and are at $350-360/t. “This is 20-30% below the average prices in 2022, but this level remains comfortable for Russian exporters,” Grishunin added.

According to Krasnozhenov, China, India and other Asia-Pacific countries will become the main markets for the products of the Northern Star. More than 90% of the steel in this region, according to him, is smelted by the blast-furnace converter method, which uses coking coal (as opposed to electric arc furnaces. – Vedomosti).

Grishunin also believes that China and India will be key consumers. He recalled that India, back in 2021, stated that the country’s needs were about 40 million tons of Russian metallurgical (coking) coal per year. According to Grishunin, deliveries of coking coal from Russia to India in 2022 amounted to only 2 million tons, which “leaves significant growth potential” for exports.

Grishunin estimates the potential demand for Severnaya Zvezda’s products in the domestic market at about 1 million tons “as a replacement for less valuable grades of coal.” Burmistrov adds that coking coal from the Syradasayskoye field can also be supplied to Turkey and North African countries.

Problems with the supply of equipment from the US “Northern Star”, according to experts, will be able to solve by switching to domestic or Chinese equipment.