Ukrainian steelmakers can assess Russian met coal and coke amid Russia’s tightening of restrictions on exports of coking coal and metallurgical coke to Ukraine after a permitting process came into effect on 1 June.
The political and trade tensions between Russia and Ukraine has become a matter of concern for the world. However, recently it is heard that the Russian government has taken a few precautionary measures to reduce the trade tensions between both the countries.
The Russian government has announced a new regulation effective from 01 June that those Russian companies who want to export coal and coke products to Ukraine – including those for the metallurgical use-must get the permission from the economics ministry. A list of companies and the volumes they wish to send was submitted at the end of May for review by the authorities, but no details have been made public.
It is still unclear whether the new system will delay or restrict volumes heading to Ukraine, and end-users are trying to gauge its significance. However, few of the major Ukrainian importers which import a big chunk of Russian coal and coke has not responded yet on the following matter.
Ukraine’s dependency on coking coal imports has risen sharply in the past two years, as the country’s mills attempt to return steel output to levels achieved before the armed conflict in eastern Ukraine escalated in 2016-17. The conflict has affected several steel production facilities directly and also their access to some key local raw material supply sources.
One of the market participants shared that some Russian coal shipments could be directed to Ukraine via Belarus, in order to sidestep the permitting restrictions. But no companies have stated any such intentions.
It is to be noted that there are continuous trade tensions going between both the countries. In the month of April, it was heard that Russia is planning to increase export duty on met coke to Ukraine. The expected export duty for Russian coke will be increased to USD 6.70/MT from 6.30/MT according to the Russian finance ministry. However, the previous duty hike which occurred in March rose from USD 5.90/MT. Increase in met coke export duty can be considered as the response for retaliatory measures or continued diplomatic tensions between both countries.
Russia is the largest exporter of coal to Ukraine. According to Coalmint statistics, in 2018, Russia exported 8.93 MnT coking coal, in 2017 it was 6.11 MnT and in 2016 it was around 7.22 MnT to Ukraine. Exports of met coke from Russia remained at 0.77 MnT in 2018, 0.85 MnT in 2017 and 0.44 MnT in 2016 to Ukraine. Trade data show Ukraine importing 5.25 MnT of coking coal in January-March 2019, of which 77% came from Russia.
Opportunity for US suppliers:
The trade tensions surrounding Russian coking coal supply into Ukraine could open up opportunities for US suppliers to sell some additional material to the country’s mills.
US coking coal is likely to be a more attractive option for Ukrainians than Australian product — assuming the grades are a suitable match for requirements — owing to shorter delivery times and competitive prices. Few market participants shared that Ukrainians are still buying from Russia but want to take from other sources to be on the safe side if possible.
Current prices for premium grade Australia hard coking coal is at USD 202.50/MT.
US coking coal producers regard central and Eastern Europe as a key growth opportunity for exports, having increased shipments to Ukraine to 4.16 MnT in 2018 from 3.77 MnT in 2017, according to US census bureau data.
US exports to Ukraine edged down slightly in January-April 2019, to 788,072 MT from 822,575 MT a year earlier.
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