Russian coal exports barely break even

By bne IntelliNews April 12, 2024

Decline in demand in India and China has pushed Russian coal exports on the brink of not breaking even, Vedomosti daily reports citing the data of the Price Index Centre (PIC).

Export prices for Russian thermal coal have fallen to their lowest since 2021 due to low demand in major export markets that are being served from the Far Eastern ports. The export price for coal declined by 6%-13% year to date to $67 to $95 per tonne depending on the grade. 

At ports in the south and north-west of the country, export prices were even lower, despite additional transport costs. At the Black Sea port of Taman and at Baltic Sea ports the prices declined by 13%-14% ytd, to their lowest since May 2021.

At current export prices, Russian coal supplies abroad become unprofitable, according to the data cited by Vedomosti, with the netbacks for exporters in the southern, northwestern and far eastern ports having become negative at $5-$7 per tonne.

Sources in three coal companies confirmed to Vedomosti the significant reduction of prices and profitability of export. One of the sources said that due to the seasonal weakening of demand for coal and the general decline in consumption of this type of fuel in Europe, coal supplies to Asian markets from Colombia, South Africa and the USA are growing, which leads to increased competition and puts pressure on prices. 

According to another source cited by the daily, the decline in prices for some grades of Russian thermal coal in the first quarter reached 20% compared to prices at the end of 2023. Export duties linked to the exchange rate are an additional burden for coal producers, one of the sources added.

At the same time, logistics costs continue to grow, market participants said. The total cost of transporting coal to Far Eastern ports, including railway tariff, wagon rental and stevedoring services, exceeds 45% of the sales price. Since 2021, logistics costs have increased by more than 70%, market participants estimated for Vedomosti

The share of logistics costs in the price of coal in western ports exceeds 80%, including railway costs of about $40 per tonne, another source estimated.

According to RosStat, in January-February 2024 coal production in Russia stood at 69.9mn tonnes, inching up by 0.5% year on year, but in February alone coal mining declined. In 2023, according to the Ministry of Energy, coal exports from Russia fell by 3.9% y/y to 212.5mn tonnes, while production fell by 1.1% to 438.7mn tonnes.

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