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Pulse of Coal - June 19

Coal industry - actual figures and facts. Partner project of the Modern Analytical Agency (CAA) and the EastRussia portal

Mining, logistics, prices, export - all that the coal industry in Russia and in the world lives on is concise and to the point - in a new partner project of the Modern Analytical Agency (CAA) and the EastRussia portal

Pulse of Coal - June 19
Photo Shoot: Łukasz Dyłka from the website Pixabay
Special project Coal of the East of Russia

A brief overview of the global coal market

Last week, there was a decrease in steam coal quotations on the European market below 106 USD / t. The news of an increase in material exports by Colombian company Cerrejon in June 2021 put pressure on coal indices. The price of natural gas on the European trading platform TTF remained at 28.2 EUR / MWh (unchanged by 09.06.2021). The cost of carbon dioxide emission quotas was 51.34 EUR / t. (-2.17 EUR / t. To 09.06.2021). Coal reserves at ARA terminals are at the level of 4.8 million tons (-0.2 million tons by 9.06.2021)

On June 15, 2021, the Czech government demanded that Poland be fined $ 149 million for refusing to comply with the order of the EU Supreme Court to close the Polish Turov coal mine, located on the border with the Czech Republic. At the moment, the Polish government refuses to close the plant, since the share of coal-fired power plants in the country accounts for over 50% of the generation volume versus 25% of the generation using renewable energy sources. In 2019, the European Commission adopted a climate strategy that aims to achieve EU carbon neutrality by 2050.

A number of major deals with Indian coal traders keep the price of South African export material at multi-year highs in the range of $ 104-106 / t. Coal reserves at Richards Bay terminals dropped to 2.87 million tons (-0.1 million tons to 09.06.2021).

South African President Cyril Ramaphosa has ordered private companies to be allowed to establish generating facilities with a capacity of up to 100 MW without compulsory licensing by the National Energy Regulator of South Africa (NERSA). The move is intended to ensure the country's energy security by stripping the state-owned generating company Eskom of its monopoly on coal-fired electricity generation. In 2020, following the failure of a number of Eskom facilities, the South African government was forced to implement rolling blackouts throughout the country.

Coal prices of 5500 kcal / kg NAR of domestic production in the port of Qinhuangdao exceeded $ 145 / t. China's National Development and Reform Commission (NDRC) has waived price caps for thermal coal at mines and loading ports due to the limited supply of material in the domestic market, increased demand for electricity and high electricity costs.

On June 15, 2021, the Chinese government decided to partially close the Yantian terminal at the Chinese port of Shenzhen. The reason for the closure was the outbreak of coronavirus in Guangdong province. Difficulties with receiving cargo arose not only in Yantian, but also in the nearest Shekou terminals in Shenzhen and Nansha in Guangzhou - the third and fifth largest ports in the world. According to experts, the situation may stabilize by early autumn.

Australian energy prices exceeded $ 128 / t. due to increased demand from South Korean and Taiwanese generating companies and limited coal shipments from Australia. Taking into account the growth of Australian material indices, companies from Taiwan and South Korea are purchasing coal with a delayed delivery in Q4 2021. Due to the flooding in Australia in March 2021, a number of local mining enterprises were forced to reduce production and are now selling reserves remaining in their warehouses.

Limited supplies of export Indonesian coal due to torrential rains in the south of the country, as well as high demand from China, contribute to the growth of quotations for material from Indonesia above $ 95 / t.

Seasonal demand from steel mills in Southeast Asia for metallurgical coal and a number of large supplies of coking material to Indian traders supported metallurgical coal prices from Australia above $ 173 / t.

Australian manufacturer Foxleigh and Japanese steel company Nippon Steel have approved a benchmark for the price of low-volatile coal PCI for Q3-2021 at 123 USD / t. FOB.

Japanese steel company JFE Steel has decided to increase its steel production in order to supply raw materials for the construction of windmills in Japan. The Japanese government's green strategy envisages the construction of windmills with a combined capacity of up to 10 MW by 000 and up to 2030 MW by 45.


CoalStar Eduard Khudainatov won the auction for the Bogatyr coal mine

On June 11, 2021, Eduard Khudainatov's company Bogatyr open pit (registered in March 2021) won an auction for a license to develop the Bogatyr open pit mine located at the Gorlovskoye coal deposit in the Novosibirsk region. The mine reserves are 300 million tons of anthracite. The cost of the development license reached RUB 3.2 billion. ($ 44.5 million).

Initially, the participants in the auction were a subsidiary of the state corporation Rostec - RT-Bogatyr, Eduard Khudainatov's coal company CoalStar, presented at the auction by two companies - Bogatyr and Antares open pit mine. The Tashebinsky coal mine, owned by Igor Markanov, also planned to take part in the auction.

On June 02, 2021, following a complaint from the state corporation Rostec, the Federal Antimonopoly Service of Russia (FAS) recognized the additional terms of the auction as contrary to the law. However, on June 11, 2021, Rostec withdrew its complaint and withdrew from the auction.

According to the complaint, the additional terms of the auction limit the number of potential bidders. The winner of the auction had to guarantee the transportation of at least 10 million tons of coal per year along the Bersk-Novoaltaisk railway line, adjacent to the Trans-Siberian Railway. In addition, the company responsible for the development of the Bogatyr open-pit mine will have to build at least five large-capacity specialized vessels for the export of coal. The winner of the auction should not be an offshore company, but its beneficiaries should be Russian tax residents.

As a result, the Federal Agency for Subsoil Use of Russia (Rosnedra), responsible for organizing the auction, removed the clause on criminal liability arising in connection with the violation of additional conditions, canceled the auction protocol and revised the bids without Rostec's participation.

CoalStar is a coal mining holding that includes the Mayrykh coal mine and the Beyskoye coal deposit. Commercial reserves of coal from the Beyskoye coal deposit amount to 1.36 billion tons.In 2020, CoalStar's production amounted to 4 million tons.

In 2020, the volume of anthracite production in Russia amounted to 22.3 million tons (-0.4 million tons, or -1.8% compared to the same period last year), of which 11.9 million tons or 53% were mined by Sibanthracite, owned by A- Pass Albert Avdolyan. According to preliminary estimates, the production of the Bogatyr open pit in 2025-2030. may amount to 5-8 million tons. Thus, the share of Bogatyr in the total volume of anthracite production in Russia in 2030 may be 1/4 of 30 million tons, due to which the Bogatyr open-pit mine can become the second largest anthracite producer in Russia after Sibanthracite.


Glencore CEO Warns of Downside Risks of Mineral Investment

On June 06, 2021, speaking at the energy panel of the 23rd St. Petersburg International Economic Forum, Glencore CEO Ivan Glazenberg warned of the risks of abandoning investments in the mining industry. According to Ivan Glazenberg, a reduction in investment in the coal industry could lead to a shortage of fossil fuels and higher prices for it. For example, the trend of phasing out coal in the energy sector, which intensified last year, led to an increase in steam coal prices from $ 50 / t. up to USD 125 / t A similar point of view was expressed by Igor Sechin, head of the Russian oil company Rosneft. According to the CEO of Rosneft, the rapid transition from traditional fossil fuels to renewable energy sources threatens energy security and could lead to negative consequences for the global energy balance.

Kuzbass may increase production by 2030 subject to expansion of BAM and Transsib

On June 16, 2021, during a conference on subsoil use, Kuzbass Coal Industry Minister Oleg Tokarev said that by 2030 Kuzbass coal companies could increase production to 370 million tons, subject to the expansion of the Baikal-Amur Mainline (BAM) and the Trans-Siberian Mainline (TSR) ...

This figure is higher than the estimates provided by the strategy for the development of the coal industry in Russia until 2035.

Under the optimistic scenario outlined in the strategy, the volume of coal production in the Kemerovo region by 2030 may amount to only 295 million tons.

On March 03, 2021, Vladimir Putin called for an increase in coal exports from Kuzbass to the east to 68 million tons per year by 2024.

In 2021, the coal enterprises of Kuzbass intend to increase coal production to 235 million tons (+ 15 million tons or + 6% by 2020).


Vorkutaugol to cease steam coal mining

On June 11, 2021, Vorkutaugol announced the termination of steam coal production from the first quarter of 2022. The decision was made in connection with the suspension of Vorkuta CHPP-1 and the transfer of Vorkuta CHPP-2 to gas consumption.

Photo: JSC "Vorkutaugol"

Vorkuta CHPPs are the only enterprises in Vorkuta that consumed thermal coal mined at the Vorgashorskaya mine. After the termination of thermal coal production at the Vorgashorskaya mine, the production of coking coal will be increased.

Vorkutaugol is one of the largest coal mining companies in Russia with a production volume of 2020 million tonnes in 10.3 (+0.1 million tonnes by 2019)

Severstal is a Russian steel and mining holding owned by Alexei Mordashov.

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