Seaborne coal exports from Russia fell by 42% in October
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Seaborne coal exports from Russia in October fell sharply in annual terms – by 42%, to 11.5 million tons. The main buyer of Russian coal, China, is reducing purchases due to high reserves in ports. In general, for January-October, exports remain in the positive zone and at the end of the year are likely to remain at the 2022 level. According to analysts, although export prices for Russian coal may rise in the fourth quarter, significant discounts to world prices will persist throughout 2024.
Sea exports of Russian coal in October decreased by 42% year-on-year, to 11.5 million tons, according to Kpler data (available to Kommersant). Last month, purchases of Russian coal were reduced by main consumers China and India – by 32% (to 4.4 million tons) and by 41% (to 1.1 million tons), respectively. The decline in purchases from China occurred amid high inventories at ports, while in India weak demand is observed amid reduced market activity due to the Diwali holiday on November 12.
In general, in January-October, sea exports of Russian coal increased by 2%, to 147 million tons, according to Kpler data. According to the Russian Ministry of Energy, coal exports from the beginning of 2023 amount to 176 million tons (including railway exports), and production is 373 million tons, which corresponds to last year’s figures.
The Ministry of Energy sets a goal to maintain production and export figures at last year’s levels, Deputy Minister Sergei Mochalnikov said on November 14 during Transport Week. “The most important task is to stay within the parameters of 2022–2021. This is production in the region of 440 million tons, exports in the region of 220 million tons, plus or minus,” he said. Mr. Mochalnikov noted that the demand for Russian coal is at least twice as high as current exports due to logistics restrictions. “Market demand significantly exceeds our export capabilities. Even using the ports of the Azov-Black Sea basin and the North-West – although here we see restrictions, there is no free access to these ports – the demand for Russian coal is at least twice as high as our exports,” he believes.
After the introduction of the European embargo, coal exports through the ports of the North-West and the Black Sea were reoriented to the Middle East, Asia and Africa, as follows from the presentation of the largest coal producer in the Russian Federation, SUEK. Based on the results of January-October, the company itself reduced exports through the ports of the North-West by 5%, to 8.6 million tons, and through the Azov-Black Sea basin – by 63%, to 1.3 million tons, while exports through the eastern ports increased by 14%, to 21.5 million tons. Total shipments of SUEK coal, taking into account the domestic market, increased by 1%, to 69.1 million tons.
The pace of Russian coal exports also depends on prices. Last year, Russian coal companies maintained production and exports due to discounts to global benchmarks. Discounts have fallen sharply this year, as have coal prices in absolute terms, increasing competition with other global suppliers. In addition, lower gas prices have reduced demand for coal in Europe compared to the last heating season, putting pressure on prices.
However, according to Neft Research forecasts, in the fourth quarter, spot thermal coal prices will increase seasonally: in the northwestern ports the increase will be 16% quarter-on-quarter, to $89 per ton, in the south – by 8%, to $87 per ton ton, in the Far East – by 6%, to $109. The indices will be supported by rising demand for coal in the energy sector of China, India and Turkey. Neft Research expects high volatility in prices for Russian thermal coal in 2024 due to various restrictions, as well as the persistence of significant discounts. According to agency forecasts, discounts will decrease in 2025 against the backdrop of a reduction in supply from other suppliers, primarily Indonesia, as well as due to the completion of the formation of logistics chains for coal exports from Russia.
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