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Pulse of Coal - February 20

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 - February 20
Special project Coal of the East of Russia

A brief overview of the global coal market

Last week, the high cost of European CO2 quotas and falling gas indices drove coal prices on the European market below $ 64 / t. The exchange price of European CO2 quotas reached 38.0 € / t. (+5.2 EUR / t. Or + 16% by 01.02.2021). According to market participants, by 2030 the cost of quotas may exceed 60 EUR / t. with a growth potential of up to EUR 100 / t. A temporary reduction in demand for imported gas in the EU had a negative impact on gas indices on the European trading platform TTF, dropping quotations to 16.4 EUR / MWh (-3.4 EUR / MWh by 10.02.2021). Nevertheless, a cold winter in Europe, as well as a decrease in the volume of wind generation in a number of EU countries, may provide support to coal prices in the short term.

Growth in demand from Indian cement companies seeking to sign contracts ahead of the start of the monsoon season amid recovery in coal shipments to Richards Bay after heavy rains last week supported South African coal quotes at $ 87-89 / t. Coal reserves at Richards Bay terminals increased to 3.3 million tons (+0.4 million tons or + 14% by 10.02.2021).

On February 16.02.2021, 26, South African President Cyril Ramaphosa, in his State of the Union Address, announced the start of energy reforms to increase the efficiency of current generating capacities. According to the plan for the economic recovery of South Africa from the consequences of the pandemic, it is planned to spend over $ 11.8 billion for the needs of the energy sector. The country's government intends to create an additional 2030 GW of generating capacities based on renewable energy sources, natural gas and coal. By 1.5, an additional 2020 GW of coal capacity will be commissioned. The President of the country separately noted that these measures are being taken to reduce the load on Eskom, the key coal company supplying energy in the country, in order to avoid the rolling blackouts that occurred in XNUMX.

The onset of New Year's holidays in China and a number of Asia-Pacific countries (February 12-27.02.2021, XNUMX) limits the trading activity of market participants, which weakens the Australian coal indices.

In January 2021, coal imports to Japan increased to 10.7 million tons (+1.04 million tons, or + 11% compared to January 2020), which is the highest figure since December 2019. cold snap in December 2020 and January 2021, low volumes of nuclear generation and a reduction in LNG supplies to the country.

On February 13.02.2021, 7.3, a powerful earthquake with a magnitude of 6.8 points occurred in Japan in the Fukushima region. As a result, about XNUMX GW of coal-fired generating facilities were out of order. Representatives from Tohoku Prefecture said that power supplies from these coal plants will be resumed within the next week.

Despite weak demand from the Asia-Pacific region for Indonesian coal due to public holidays, limited supplies of material due to monsoon rains in Indonesia support the indices at the current level.

Partial resumption of the activities of metallurgical plants in a number of APR countries amid the New Year holidays strengthened the indices of metallurgical coal from Australia.

The Ministry of Energy predicts an increase in coal exports to Asian countries by 42%

According to the forecasts of the Ministry of Energy of Russia, by 2025 the export of Russian coal to the Asia-Pacific region will increase to 174 million tons (+51.5 million tons or + 42% by 2020).

The growth of supplies is intended to meet the growing demand from the countries of Southeast Asia (India, Vietnam, Malaysia, Indonesia, Thailand, etc.). According to Deputy Energy Minister Anatoly Yanovsky during a meeting on the development of the coal industry, in 2025 the volume of Russian coal exports in this specific direction may amount to 57.5 million tons (+33.4 million tons or + 128% by 2020) ... Export earnings from coal account for about 4% of total Russian merchandise export earnings. Moreover, the share of coal in Russian Railways' freight turnover reaches over 40%.

Decarbonization policy in the EU and the growth of generation based on renewable energy sources are forcing coal producers in Russia to redirect supplies from European to Asian markets. In 2019, the share of coal in the global energy balance fell to 27%, which is the lowest figure in the last 16 years. Therefore, from 2016 to
2020 coal supplies to the Asia-Pacific region grew by more than 40%.

Currently, Russian suppliers export coal to the APR countries through the ports of the Far East and land border crossings with China and Mongolia. The key problems limiting export volumes are the lack of railway capacity of the Baikal-Amur Mainline (BAM) and the Trans-Siberian Railway (TSR), as well as price volatility for both energy and coking material. According to market participants, the lack of transport capacities in the Far East will remain even after 2024, when the second stage of modernization of the Eastern landfill is completed (expansion to 182 million tons per year).

Ukrainian coal imports increased by 10% in January 2021

In January 2021, coal imports to Ukraine increased to 1.80 million tons (+0.18 million tons or + 10% against January 2020). 1.30 million tons or 72% of Ukraine's coal imports fell to Russia, 0.30 million tons or 16.5% to the USA, 0.16 million tons or 9% to Kazakhstan, the remaining 2.5% to other countries.

The decline in material imports throughout 2020 led to a low level of coal reserves in Ukraine against the background of the current heating season in the country. In 2020, Ukraine imported 16.9 million tons (-4.1 million tons or -19.5% by 2019). The growth in coal consumption in January 2021 led to a decrease in material reserves in the country as of February 01, 2021 to
0.30 million tons (-0.30 million tons or -50% by January 01, 2021).

Representatives of the Ukrainian Ministry of Energy note that the country needs to increase coal imports to maintain a stable energy supply. However, given the shortage of material at local coal-fired power plants, the Ukrainian government is forced to cut coal-fired generating capacities that cannot be minimized and maintained. Two coal-fired power plants were shut down last week.

On December 16, 2020, Ukraine extended a 65% duty on coal imports from Russia until the end of 2021. The duty does not apply to imports of anthracite and coking coal due to the shortage of these types of material on the Ukrainian domestic market.


Severnaya Zvezda needs ships to export coal along the Northern Sea Route

The Severnaya Zvezda company, owned by Roman Trotsenko's AEON, plans to announce a tender for the construction of 28 ice-class ships for exporting coal along the Northern Sea Route (NSR) by 2032. The total cost of these ships could reach $ 1.4 billion.

According to the May decree of President Vladimir Putin, by 2024 the freight traffic of the NSR should increase to 80 million tons.However, in July 2020, the President of Russia indicated that the planned volume of cargo transportation along the NSR could be reduced from 80 million tons to 50-60 million tons by 2024 due to a decrease in economic activity against the backdrop of a pandemic and deteriorating market conditions. In 2019, the cargo traffic along the NSR amounted to 31 million tons. In 2020, 33 million tons of oil, liquefied natural gas (LNG) and metals were delivered along this route. Although no coal was supplied, its transportation is included in the Severnaya Zvezda strategy.

Exporters are concerned about the shortage of the icebreaker fleet and ice-class vessels with a possible increase in traffic on the NSR. The deficit of the fleet by 2030 may amount to 48 vessels.

In December 2020, Glavgosexpertiza issued a permit to Severnaya Zvezda to build the first stage of a coal mine in the southwestern section of the Syradasay coal deposit in Taimyr. The design capacity of the first stage of the mine will be 5 million tons per year with a potential increase to 10 million tons. The start of coal production is scheduled for
2021 The estimated reserves of the Syradasay coal deposit are
5.7 billion tons of coal. Glavgosexpertiza also allowed the construction of the Taimyr enrichment plant with a capacity of 5 million tons per year. In addition, Severnaya Zvezda plans to build a coal terminal located 87 km from the port of Dikson on Taimyr (see CAA Russian Coal Weekly, October 16, 2020).

According to Roman Trotsenko, owner of AEON, Severnaya Zvezda is interested in chartering vessels of the ice class Arc 5 with deadweight of 105-110 thousand tons under a transportation or lease agreement. By 2024, the company will need 10 ice-class vessels to export 6.5 million tons of coal along the NSR.

AEON is an international investment fund with a portfolio of a wide range of transport projects, including airports and river ports.

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