The Russian government recently has extended its suspension of export duty for thermal coal and anthracite until December, a move that may provide relief to Russian thermal coal producers but is unlikely to turn into an opportunity to ramp up exports, market sources said.
At the end of April, the government had removed the duty from May to August, which did lead to an uptick in exports in the fourth period compared to January-April but was largely unchanged from the previous year period.
Russia exported 48.4 million metric tons of thermal coal between May and August, up from 37.3 MMt in the first four months of 2024 but flat compared to a year ago period, according to S&P Global Commodities at Sea data.
China, Turkey, South Korea, India and Taiwan were the largest consumers of Russian thermal coal, a shift in the supply chain caused by Russia’s invasion of Ukraine that started in 2022, as European countries along with the US heavily sanctioned Russia in a bid to deescalate the war, market participants said.
“[The extension of export tariff reduction] doesn’t impact price: logistics and demand – these two it only impacts.” a UAE-based trader dealing in Russian material said.
Russian suppliers’ stagnation continues
Usual buyers of Russian coal have started to find dealing with the country precarious amid continuous sanctions from the US, an Indonesia-based trader said.
China, which is Russia’s primary buyer in Asia, also began to take a cautious stance against dealing with Russia.
Turkey has been a major consumer of Russian thermal coal primarily due to cost-effectiveness and as most power plants prefer using high-calorific coal coming from the Black Sea and Baltic regions. The reduction in tariff may have prompted Turkey’s buyers to flock for Russian coal as Turkey imported 6.7 MMt of thermal coal from the country between May-August, up from 6.1 MMt in January-April, but lower compared to the 7.4 MMt from a year ago period. CAS data showed.
With every fresh round of US sanctions, a higher number of Russian companies are falling under restrictions to supply coal globally. The first Singapore-based trader said that currently only South Korea is procuring Russian high-CV cargoes which, coupled with the limited availability of Russian cargoes, somewhat supported the price until now.
“South Korea found a cheaper alternative in Russian high-CV cargoes as its primary preference FOB Newcastle 6.000 kcal/kg NAR became quite costly,” the trader said. An Indonesia-based producer said that the FOB Newcastle 6,000 kcal/kg NAR coal grade might average around $143.50/t in the fourth quarter of the ongoing fiscal.
The price of FOB Russia Pacific 6,000 kcal/kg NAR averaged $93.92/t in January-July, down from $118.83/t over the same period the previous year, data from S&P Global Commodity Insights showed. Platts last assessed the grade at $96/t CFR India Aug. 30.
South Korea imported 6.2 MMt of thermal coal from Russia in May-August, up from 5.1 MMt in the first four months of the year but down from 7.8 MMt in May-August of 2023. CAS data showed.
A silver lining for Russian suppliers
Higher railway, freight and port costs impacted sellers’ margins in the western part of the country, making it difficult for them to supply material at a desired price to Indian buyers.
“On average, they were making a $0-$5/t margin, some were even operating at negative margins before the removal of export duty was announced,” an India-based buyer said, adding that after the suspension of the duty their margins slightly bettered, but India was not buying significantly for the western producers to take advantage of the policy change to maximize their profit margin.
The Indonesian trader said that if the South Korean power plants continue to buy Russian cargoes even after the latest round of sanctions, the latest move of extension in zero export duty would benefit Russian producers based in the country’s eastern side.
“Korean [thermal coal] market does limited import quantity from Russia [due to the wave of sanctions imposed by Western countries] but I think most gencos already booked their cargoes.” a South Korea-based trader said.
Source: Platts
