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The profitability of exports of thermal coal from Russia began to grow in all directions following the recovery of quotations on world markets. This follows from the review of the analytical company Neft Research, which was reviewed by Vedomosti.

According to the company, netbacks (sales price minus logistics costs) began to increase from the beginning of July, when export prices began to recover on FOB ("with loading on board") bases Taman and the Baltic Sea. At the beginning of August, it was most profitable to ship coal through the ports of the Far East, where the net back was 4,076 rubles per 1 ton (+52% compared to the beginning of July). Shipments from Taman were in 2nd place in terms of profitability - 2,035 rubles per 1 ton (+33%), and in third place – from Baltic ports – 1,743 rubles per 1 ton (+69%).

As Vedomosti wrote, coal exports from Russia in 2024 are declining against the background of low export prices and problems with export by rail. According to the Center for Price Indices, the price of thermal coal with a calorie content of 6000 kcal/kg FOB Far East has decreased by 6% since the beginning of the year and in mid-July amounted to $95 per 1 ton. In Taman, coal of the same caloric content was shipped at $70 per 1 ton (-17%), in the ports of the Baltic Sea – at $65 per 1 ton (-14%).

The price of 1 ton of energy coal on the FOB basis in the Australian port of Newcastle (the world benchmark) on August 15 was $147 per 1 ton, which is 9% more than the July values, according to ICE exchange data. Over the past 2-3 weeks, Russian coal has also added $8-10 per 1 ton in major export destinations following international benchmarks, says Boris Krasnozhenov, head of securities analytics at Alfa Bank.

Quotes of thermal coal, according to Maxim Khudalov, chief strategist of the Vector X investment company, react to the rising cost of gas in the European Union, where they fear that an attack by the armed forces of Ukraine (AFU) on the Kursk region will lead to a decrease or disruption of pipeline gas supplies. Recall that on August 8, the price of September futures at the European TTF hub in the Netherlands crossed the $450 mark per 1,000 cubic meters for the first time since December 2023 and reached $455.

Offshore coal exports from Russia in January – June in millions of tons

Year	Ports of Far East	Ports of North – West	South ports	Other ports	Total
2022	49,45	20,28	17,36	0,09	87,18
2023	51,93	27,5	15,39	0,27	95,09
2024	47,4	24,23	7,38	0,1	79,11

Source: KPLER

At the same time, the CEO of Russian Coal, Vladimir Korotin, told Vedomosti that fluctuations of $ 1-2 "can in no way be called a recovery in world coal prices." Other coal companies did not respond to inquiries.

The economy of supplies was also positively affected by the cancellation of exchange duties on exports of energy coal and anthracite from the Russian Federation from May 1 to August 31.

Despite the increase in profitability of supplies, the volume of exports of thermal coal in the Asian direction is declining "due to sluggish demand," analysts at Neft Research write. Vedomosti sources familiar with customs statistics note that exports of Russian energy coal to the countries of the Asia-Pacific region (APR) in the first half of 2024 decreased by 9% in annual terms to 80.5 million tons, supplies to China fell by 8% to 45.5 million tons, to India – also by 8% up to 13 million tons.

A decrease in demand for thermal coal in Asia may occur for several reasons, says Dmitry Baranov, a leading expert at Finam Management. "Firstly, due to increased competition in the industry, supplies from other countries could increase. Secondly, an environmental factor could play a role in connection with global warming and increased control of hydrocarbon emissions," he says.

Quotations for thermal coal in China by the end of the year will amount to $ 130-135 per 1 ton, Khudalov predicts. Prices will be affected by a possible weakening of the rates of the US Federal Reserve System (FRS), which may provide an influx of liquidity to commodity markets. He considers another important factor for the coal market to be the risk of La Niña, which will lead to a sharp decrease in the average air temperature in Australia, which, in turn, will provoke an increase in demand for energy coal.

At the same time, exports of coking (metallurgical) coal from Russia to Asia in six months, on the contrary, increased by 33% year-on-year to 30 million tons, Vedomosti sources claim. In particular, exports to China amounted to 15 million tons (+11%), to India – 6.7 million tons (+74%). India maintains high growth rates of steel production, recalls Khudalov. By the end of the year, the indicator, according to him, will grow by 6% compared to 2023 to 152 million tons.

The Neft Research review says that the southern direction is traditionally more profitable for the supply of coking coal due to the high profitability of exports to India. In this direction, as Vedomosti has repeatedly written, in the winter and spring of 2024, there was a sharp decrease in coal supplies to ports. Earlier, Russian Railways indicated that there were no restrictions on shipments during this period from the company, and the problem was the lack of requests for transportation from coal companies due to disagreements with port operators on transshipment tariffs. As a result, coal shipments to the ports of the Azov-Black Sea basin fell by more than 2 times. According to the results of seven months, as specified by the representative of Russian Railways, they amounted to 7.7 million tons.

In the coking coal sector, netback is declining amid falling prices, says Alexander Kotov, head of consulting at Neft Research. Since the beginning of 2024, quotations of this type of fuel based on FOB Australia have fallen by 75% to $205 per 1 ton in August, according to data from the Singapore Stock Exchange (SGX).

Deputy Energy Minister Sergei Mochalnikov said in an April interview with Vedomosti that by 2030, the volume of coal exports from the Russian Federation will reach 360 million tons per year (see the publication dated April 22). Last year, Russia supplied 212 million tons of coal abroad (-3.9%), produced 438.7 million tons (-1.1%).

Earlier, the Ministry of Energy proposed a number of measures to support the coal industry, Kommersant reported in June, citing sources. Among them are negotiations with China on the abolition of import duties on Russian coal, simplification of logistics conditions and the abandonment of foreign indices in the calculation of mineral extraction tax. The press service of the Ministry of Energy reported that one of the most effective measures to support the coal industry in the ministry is the return of reducing coefficients for its transportation (canceled from June 2022 - Vedomosti) by rail.

Source: https://www.vedomosti.ru/business/articles/2024/07/19/1050932-eksport-koksuyuschegosya-uglya-iz-rossii-upal?utm_campaign=newspaper_19_7_2024&utm_medium=email&utm_source=vedomosti