Amidst a coal supply crunch in China due to the ban on Australian coal, several thermal coal producing countries such as Indonesia and South Africa are grabbing every opportunity to fill the trade void. And, Russia also seems to be equally keen to seize the opportunity.
The country has been trying to make all ends meet to reach out to the large coal consuming countries in Asia such as China, India, Japan, and South Korea, while the Western countries have been gradually closing their doors to coal and coal-fired power plants and abandoning all forms of carbon emissions.
As per CoalMint data, Russia’s thermal coal exports have risen by 7% y-o-y to 47.45 million tonnes (mn t) during Jan-Apr’21 with the largest share being exported to China, South Korea, and Japan.
Russia’s big bet on coal
With the rise in industrial activity and consumer spending in China and other developing Asian countries, the Russian government has been betting big upon coal as it sees robust prospects for the fuel at least for the next two decades.
The Russian government has planned to spend $10 billion on railroad upgradation to help boost coal exports, which involves modernising and expanding the Soviet era rail lines till as far as the eastern ports of the country.
The government has committed to spending 720 billion rubles ($9.8 bln) to expand Russia’s two longest railroads — the Tsarist-era Trans-Siberian and Soviet Baikal-Amur Mainline– that link western Russia with the Pacific Ocean. This initiative aims to boost cargo capacity for coal and other goods to 182 mn t a year by 2024.
Coal capacity has already more than doubled to 144 mn t under a 520-bln ruble modernisation plan that began in 2013.
CoalMint data reveals, Russia’s coal production increased by 8% y-o-y to 176.45 mn t during Jan-May’21 and the government has also envisaged a 10% increase in coal output from pre-pandemic levels by 2035.
Rising demand in China
China’s altered trade dynamics with Australia have created a major supply shortage in the country as it now has to rely upon coal imports from Indonesia, Russia, South Africa, and the US.
As per CoalMint data, Russia’s thermal coal exports to China have gradually risen since January to 7.7 mn t during Jan-Apr’21 as against 5.8 mn t in the same period last year.
Several cities in China have been facing a series of blackouts amid tight supply of domestic coal since a few fatal accidents have resulted in increased safety inspections and subsequent closure of several mines.
China’s power consumption during Jan-May’21 has risen by 18% y-o-y to 3,230.5 TWh, owing to a rebound in economic activities and higher-than-usual temperatures.
Further, with rise in the prices of raw material like coal, steel and iron ore, Chinese authorities have also been capping power costs in an attempt to control rising inflation.
Russian coal in ex-China markets
Russian thermal coal has been gaining a stronghold in the Asia-Pacific region too with demand rising in India, Japan, South Korea, and Vietnam.
The relatively low sulphur content of Russian coal is likely to give it an edge as most countries have tightened pollution laws in recent years, while some are gradually phasing out investment in any new coal-fired power plants.
CoalMint data reveals, Russian thermal coal exports to major Asian markets have increased sharply. In Jan-Apr’21, Russia exported 4.7 mn t coal to South Korea up 24% y-o-y, and 4.9 mn t to Turkey up 23% y-o-y, among several others.
Outlook
In the current scenario of coal demand exceeding supply, Russia’s coal presence in Asian countries is likely to continue. With the China-Australia trade tensions unlikely to be resolved soon, Russia has an added advantage.
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