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Pulse of Charcoal - March 27
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
A brief overview of the global coal market
Last week, thermal coal indices in Europe exceeded $ 73 / t. The rise in Brent crude oil quotes to $ 63.6 / bbl (+ $ 0.9 / bbl by 01.03.2021) amid blocking the movement of tankers in the Suez Canal due to the grounded vessel provided support to coal prices. The rise in gas prices on the TTF trading platform to 18.9 MWh (+0.7 MWh or + 4% by 17.03.2021) due to its shortage in European underground gas storage facilities (UGS) contributes to an increase in power plants' demand for coal in Europe. Nevertheless, news of the extension of Covid restrictions in Germany, France and Austria, as well as warming in some EU countries, may limit further growth in coal prices. Additional pressure on material price dynamics is exerted by the cost of CO2 emission allowances, which are at the multi-year highs of 41.49 € / t. (+ 4.42 EUR / t. Or + 12% by 01.03.2021).
On 21.03.2021, the Minister of Environment and Climate Protection of Poland presented the new "Energy Strategy of Poland until 2040". According to the document, by 2030 the share of renewable energy in the total energy balance of the country should grow from the current 10% to 23%. It is assumed that wind power generation, which is currently absent in Poland, should reach 5.9 GW. The strategy pays special attention to nuclear energy. Until 2040, Poland plans to allocate 33.7 billion euros for the development of this sector, which is also not represented in the country's energy balance. The document specifies a target for the generation of nuclear power plants of 1–1.6 GW by 2040. The new strategy drew a wave of criticism due to the lack of specific proposals to reduce coal generation. Today, 80% of the country's electricity is produced from coal. Poland remains the only state in the European Union that has not committed to become carbon neutral until 2050.
Growth in demand from Indian power plants for South African coal has strengthened the quotations of coal from South Africa to $ 100-101 / t. Market participants from India are trying to replenish stocks of material against the background of a decrease in coal volumes in local ports to 14.3 million tons (-3.0 million tons by 01.02.2021).
Reduction of export supplies of Australian thermal coal due to flooding in New South Wales supported the indices to $ 103-104 / t. Heavy rains have damaged several locomotives, making it difficult to transport coal along the Hunter Valley railroad linking Australia's mining areas and Newcastle Port.
Limited supplies of low-calorie coal due to rains in the southern provinces of Indonesia strengthened the Indonesian coal indices to $ 72-73 per ton.
The suspension of a number of coal mines in Australia due to the flooding has strengthened the quotes of the Australian PCI coal.
Japanese steel company Nippon and Australian producer Foxleigh have agreed to benchmark the PCI coal price for Q2021 101 at $ 2021 / t. FOB. (unchanged to the price for the first quarter of XNUMX).
Elgaugol pledged coal to Gazprombank in the amount of 2.06 billion rubles.
Elgaugol, owned by Albert Avdolyan's A-Property, pledged coal to Gazprombank in the amount of 2.06 billion rubles. ($ 26.4 million). The pledge is intended to ensure the fulfillment of the obligations of the coal company under the loan agreement concluded between Elgaugol and the bank on December 01, 2020.
On January 15, 2021, A-Property pledged to Gazprombank and Rosselkhozbank 100% of shares in Elgaugol (operator of the Elginsky coal deposit in Yakutia), as well as shares in Elga-Doroga and Elga-Trans (companies that manage the project's transport infrastructure) (see . CAA Russian Coal Weekly, January 15, 2020). Gazprombank received a pledge of 25.1% of the shares of each company. In December 2020, having early exercised the option to buy 49% in Elga from Gazprombank, A-Property consolidated 100% of Elga. The deal amounted to RUB 45 billion. (615.9 million dollars).
In 2020, Elgaugol produced 12 million tons of coal. The company plans to increase production to 45 million tons by 2023. In January-February 2021, the production volume of Elgaugol amounted to 1.67 million tons (+1.0 million tons, or + 74% compared to January-February 2020). The Elginskoye field is one of the largest coking coal deposits in the world with total reserves of 2.2 billion tons (according to the JORC classification). On March 12, 2021, A-Property transferred 5% of Elga to Rostec State Corporation, a Russian state-owned holding company that controls assets in various fields (see CAA Russian Coal Weekly, March 12, 2021).
On March 24, 2021, Elgaugol applied to the Ministry of Energy of Russia with a request to give priority to coking coal, rather than energy material, when transporting it by rail to the east. In the opinion of the company representatives, the extraction and transportation of coking coal is more profitable for Russian Railways due to the increased tariff for transportation and for the state, given the higher rate of tax on the extraction of minerals. However, if coking coal producers do receive preferential treatment, then small steam coal suppliers with no coal transshipment capacity could be squeezed out of the market.
Mechel warns of default risks
On March 22, 2021, Mechel, owned by Igor Zyuzin, published its financial statements for 2020. According to the document, in 2020 the company defaulted on the payment of loans received in 2010. Company representatives warn that Mechel will not be able to repay the debt without refinancing or restructuring.
In April 2020, Mechel sold a 51% stake in Elgaugol, Elga-Doroga and Mechel-Trans Vostok to A-Property owned by Albert Avdolyan for RUB 89 billion. ($ 1.17 billion), including the premium for the controlling stake (see CAA Russian Coal Weekly, April 24, 2020). Mechel also signed debt restructuring agreements with VTB and Gazprombank, according to which the maturity of VTB and Gazprombank loans was extended by seven years until March 2027 with the possibility of an additional three-year extension.
However, according to the report, the funds received from the deal with A-Property, as well as the restructuring, did not bring tangible results. The company still needs additional funds. Negotiations are underway with potential creditors. According to Mechel representatives, the current deficit of the company's working capital is RUB 330.5 bn. ($ 4.3 billion). Mechel's net debt amounted to RUB 325.6 bn. ($ 4.2 billion).
The company fears that creditors may tighten debt repayment requirements due to default on current obligations.
Mechel is a Russian mining and metallurgical company. Mechel's coal assets include coal mines and concentrators in Kuzbass and Yakutia. In 2020, Mechel's coal production amounted to 15.9 million tonnes (+1.4 million tonnes or + 9.8% by 2019).
Sibuglemet will increase production to 12 million tons in 2021.
Sibuglemet plans to increase coal production in 2021 to 12 million tons (+2.0 million tons by 2020). According to Igor Osadchy, the general director of Sibuglemet, in 2020 negative market conditions and a decrease in demand for energy resources against the backdrop of the Covid-19 crisis limited the company's production and export volumes. However, in 2021, the growth in total production will be associated with the further development of the Mezhdurechye open pit, where the main coal reserves of the company are concentrated. In 2020, Sibuglemet's investments amounted to RUB 2.3 billion. (30.3 million dollars), and in 2021 the company intends to bring this figure to 4.3 billion rubles. ($ 56.6 million). Funds are allocated for the purchase of mining equipment.
Igor Osadchiy noted that the main problem of Sibuglemet is the impossibility of increasing coal supplies to the east for sale in Asian markets due to the limited capacities of the Baikal-Amur Mainline and Transsib. At the same time, the general director of Sibuglemet criticized the transportation of coal through the port of Taman, since the delivery through the southern ports takes more than a month and is associated with additional costs.
On December 25, 2020, Sibuglemet proposed to the Russian government and Russian Railways (RZD) to increase the export quota for coking coal (see CAA Russian Coal Weekly, December 25, 2020).
Sibuglemet is one of the largest Russian coal companies supplying coking material. The Sibuglemet holding includes the open-pit mines of Mezhdurechye and UK Yuzhnaya, the Antonovskaya and Bolshevik mines, the Mezhdurechenskaya and Antonovskaya concentrators. Currently, the holding belongs to the Russian state corporation VEB.RF and until November 2020 was under the management of the Evraz Group. Most of the assets are directly owned by VEB.RF, the rest are pledged.
Coal supplies through Russian-Chinese border crossings are limited
Since December 2020, China has been restricting the acceptance of Russian goods through border crossings amid Covid-19 quarantine restrictions imposed by the Chinese government. According to a representative of Russian Railways, at present, the export of coal from Russian producers through the Zabaikalsk-Manchuria border crossing is limited. Congestion on the Russian-Chinese border leads to overloading of the railway infrastructure and additional financial costs.
In addition, China Railways, one of China's key rail operators, has requested coal supplies from Russia in open-topped containers. On January 26, 2021, TransContainer, owned by the Delo group of companies, delivered 3,9 thousand tons of material in containers through the Zabaikalsk-Manchuria border crossing. The total volume of trade turnover between Russia and China along the Trans-Baikal Railway in 2020 amounted to 17.9 million tons of cargo (unchanged by 2019), of which coal exports amounted to 3.3 million tons. In 2020, the total volume of rail transportation of Russian coal for export to China amounted to 7.9 million tons (-2.4 million tons or -23% by 2019).