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Pulse of Coal - October 2

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 - October 2
Special project Coal of the East of Russia

A brief overview of the global coal market

High gas prices in the EU and fears of a supply crisis have pushed quotes to new 13-year highs above $ 215 / t. Gas prices exceeded USD 1000 / 1 m3, the cost of October gas futures on the European TTF trading platform exceeded 82.40 EUR / MW ∙ h (+12.50 EUR / MW ∙ h by 22.09.2021). Gas reserves in Europe are 15% below the average for the last five years.

High trading activity of consumers from India and Pakistan had a positive impact on the indices of South African material, which reached the level of $ 200 / t. According to experts, the indices of South African material will grow until the end of 2021, due to problems with the railway line connecting the coal-mining provinces of South Africa and the port of Richards Bay.

The supply price for coal of 5500 kcal / kg NAR of domestic production in the port of Qinhuangdao was in the range of $ 245-255 / t. Coal shortages put China on the brink of an energy crisis, leading to massive power outages in some provinces and a forced reduction in energy consumption in the country. The shortage of coal has forced China's two largest power grids, the State Grid and the China Southern Power Grid, to prioritize supplying households at the expense of industrial enterprises.

On September 29.09.2021, XNUMX, the China Development and Reform Commission (NDRC) announced that coal supplies would be guaranteed by further increases in domestic production, imports and stock utilization in the coming months.

The Chinese electricity regulator has recommended that coal-fired power plants build up inventories during October to eliminate the possibility of winter power outages.

Limited global coal supply and strong demand from Asian generators for thermal coal have supported Australian coal prices above $ 200 / t.

Strong demand from China, which is trying to prevent the energy crisis and replenish stocks before the start of the heating season, led to an increase in the quotations of the Indonesian material 5900 kcal / kg GAR, which amounted to about $ 150 / t.

The decline in industrial activity in the PRC and the reduction in steel production by Chinese metallurgical enterprises purchasing Australian material from Asian traders put pressure on quotations of Australian coking material, which fell below $ 390 / t.


Russian coal exports to China increased by 43% in January-August 2021 amid the energy crisis in China

In January-August 2021, according to preliminary data, the total export of Russian coal to China increased to 37.0 million tons (+11.1 million tons or + 43% compared to January-August 2020), including sea shipments and shipments via railways. / d border crossings.


At the same time, the export of material through border crossings from China for 8 months of 2021 decreased to 4.94 million tons (-0.54 million tons, or -10% to the same period in 2020). Coal transportation through the Kamyshovaya-Hunchun checkpoint increased to 1.97 million tons (+0.38 million tons or + 24% versus January-August 2021), through Zabaikalsk-Manchuria decreased to 1.87 million tons (-0.69 million tons or -27%) and through Grodekovo-Suifenhe amounted to 1.1 million tons (-0.23 million tons or -17%).

Russian suppliers periodically filed complaints about problems with the passage of cargo through border crossings with China. Russian Railways periodically introduced railway conventions for rail transportation of coal due to the congestion of routes in the direction of the Russian-Chinese border crossings against the background of quarantine measures by the Chinese customs, leading to a slowdown in cargo handling and a reduction in the supply of Russian material.

China's total coal imports in January-August 2021 decreased to 198 million tons (-22.4 million tons, or -10% compared to January-August 2020). Despite the decline in Chinese imports, Russian coal suppliers managed to increase their share in the total volume of material supplies to the country in January-August 2021 to 19% from 12% in the same period last year.

The main reason for the decline in China's coal imports is the ban on supplies from Australia due to political tensions between the countries. In 2021, China faced material shortages, including due to a decrease in production by Chinese coal companies caused by restrictive quarantine measures and safety checks at mines amid increased demand, which, starting in September 2021, led to an energy crisis in the country. The north-eastern provinces of the PRC are experiencing a coal shortage, which are forced to turn off traffic lights, escalators and 3G towers to save energy. In many provinces, the authorities are offering businesses to reduce their electricity consumption, which has already caused significant damage to the industry, and the restrictions also apply to local residents. Goldman Sachs estimates that 44% of Chinese businesses have been affected by electricity shortages. Coal quotes on the PRC domestic market more than doubled, exceeding $ 200 / t, compared to the price of $ 90 / t. in September 2020

In the 4th quarter of 2021, China will seek to increase its coal imports, including supplies from Russia. Nevertheless, despite the steady growth in the export of Russian material and an increase in demand in China and other countries of the Asia-Pacific region, the export potential of Russia is limited by the throughput of the Eastern landfill.


In January-August 2021, Ukraine's coal imports grew by 12%

In January-August 2021, the volume of Ukrainian coal imports increased to 13.1 million tons (+1.4 million tons, or + 12% compared to the same period last year).

9.5 million tons or 72% of all imports of material fell on Russian exporters, 2.3 million tons or 18% were shipments of coal from Kazakhstan and 1.3 million tons or 10% were supplied by the United States.

On June 15, 2021, the Ministry of Energy of Ukraine urged local coal-fired power plants to increase coal imports in order to increase material reserves to 3.0 million tons of coal ahead of the start of the heating season. At present, coal reserves in Ukraine remain at a critically low level of 1.0 million tons (+0.10 million tons by 01.09.2021), which is 2 million tons less than the indicators planned by the Ministry of Energy. As a result of the heat wave in Ukraine this summer, local generators have increased their coal combustion, which has led to a reduction in material inventories in the country.

On December 16, 2020, Ukraine extended a 65% duty on coal imports from Russia until the end of 2021. Import anthracite and coking coal are not subject to duty, as there is a shortage of these types of material in Ukraine.

In 2020, Ukraine imported 17 million tons (-20% by 2019).


Ministry of Transport revises ship-or-pay conditions for coal companies

The conditions for the introduction of ship-or-pay contracts for transportation by rail were discussed on September 27, 2021 in the Ministry of Transport. The participants agreed on a new version of the amendments, which should meet the interests of all parties. The meeting was attended by representatives of the Ministry of Energy, Russian Railways, coal and metallurgical companies.

The new version of the bill has a number of fundamental differences from the previous version. In particular, it excludes the provision of priority access to the railway infrastructure to suppliers that have concluded ship-or-pay agreements with Russian Railways.

On April 15, 2021, First Deputy Prime Minister of Russia Andrei Belousov proposed to limit the use of the ship-or-pay mechanism and use it only for additional volumes of coal exported from Kuzbass.

In 2022–2025 ship-or-pay contracts can only be concluded by companies exporting coal from Kuzbass to the east. In 2022, under such contracts, it will be possible to ship 3 million tons of coal out of 58 million tons stipulated by the agreement between Russian Railways and the government of the Kemerovo region, in 2023 - 5 million tons out of 63 million tons, in 2024 - 10 million tons out of 68 million tons. Subsequently, contracts can be concluded for the volume of traffic equal to the increase in the throughput and carrying capacity of the infrastructure on specific routes compared to the indicators at the beginning of 2025. From 2025, routes and types of cargo are not limited.

The idea of ​​introducing the ship-or-pay principle on the railway network has been discussed for several years. On March 3, 2021, Vladimir Putin called for an increase in the export of Kuzbass coal to the east to 68 million tons per year by 2024 compared to exports in 2020 at the level of 53 million tons.

At the same time, the Consumer Council of Russian Railways criticized the ship-or-pay conditions proposed this spring. Among the complaints are the unclear criteria for selecting companies for concluding contracts, the lack of symmetric responsibility of Russian Railways and shippers, tariff parameters, terms and conditions of contracts, and other issues. The Ministry of Energy noted that the proposed form of the contract shifts the risks of Russian Railways to other participants in cargo transportation. The FAS was against it, believing that the current regulations make it possible to achieve the goals of increasing exports from Kuzbass by 30% without introducing ship-or-pay agreements.

December 2: current information on coronavirus in the Far East
Digest of regional events and latest statistics