Russian coking coal exports to Asia likely to rise amid conflict with Ukraine

Russia is likely to re-direct some metallurgical coal exports that are supposed to fulfil the European market to Asian users, with the continuous worsening Russia-Ukraine crisis.

The country exported 31.81 million tonnes of coking coal last year, with shipments to Ukraine reaching 6.82 million tonnes, second only to 9.31 million tonnes it delivered to the top destination China, according to data released by the Federal Customs Service of Russia.

Russia also exported coal to some other countries, mainly the Netherlands, Turkey, Morocco and Poland, with shipments at 1.18 million, 0.52 million, 0.25 million and 0.24 million tonnes respectively in 2021, customs data showed.

While Netherlands, Morocco and Poland are far away from the tension zone, the coking coal trade flow from Russia to Turkey may be affected should the conflict impacts the normal operations at ports in the Black Sea.

It is less likely to see a pause of coal trades between Russia and Europe, but deliveries to Ukraine and the neighbouring countries in a line are highly likely to be embroiled, although the impact remains to be seen depending on the geographic spread of the conflict. However, a large part of the supplies may head off to Asia, which has been the largest market for coking coal.

Three of the top five destinations of Russian coking coal in 2021 were from Asia, mainly China, South Korea and Japan. Shipments to the three countries, combined at 16.2 million tonnes, accounted for 50.9% of Russia's total exports, data showed.

Exports to China are most likely to expand, in line with the country's overall coal export guidance.

Russia plans to increase its exports of all types of coal to China to 100 million tonnes in 3-5 years, which is a sharp rise compared with 52 million tonnes in 2021, Russian media reported citing Sergei Mocharynikov, an official from the energy ministry.

Russia is expected to produce a record 450 million tonnes of coal in 2022, up from 436.65 million tonnes in the preceding year, as part of the effort to increase exports revenue.

High-quality coking coal, as major steel making material, is actually in short in China, due to self-insufficiency and a comparatively higher dependence on imports.

China's coking coal imports from Russia have increased for four straight years, with the shipments surging to 10.73 million tonnes in 2021 and more than doubling the volume in 2018, China's customs data showed.

Russia has become the second-largest source of coking coal to China after a trade spat with Australia froze coal trades between the two. The ongoing severe pandemic situation that has restrained imports from Mongolia also adds the likelihood of reaching other major sources, including Russia.

Import interests of Chinese buyers are likely to grow amid a bullish view on the imminent demand from downstream sectors, which has also pulled up domestic coking coal prices. More auctions were heard to have settled in Shanxi, with higher prices and trading volume.

One source with a Luliang-based mine in Shanxi increased the offer of mid-sulfur lean primary coking coal (S 1.2%, G 79) by 220 yuan/t from late last week to 2,120 yuan/t, ex-washplant with VAT, up by accumulatively 320 yuan/t since the end of the Lunar New Year holiday.

Low- and mid-sulfur primary coking coal in a major mine in Liulin of Shanxi have climbed by 330 yuan/t so far this week, encouraged by higher replenishing appetite from coking plants, Sxcoal learned.

With firmer offers and higher demand in the domestic market, offers of Mongolian coking coal also gained support at Ganqimaodu border crossing in Inner Mongolia.

Offers of Mongolian #5 raw coking coal hovered at 2,000-2,010 yuan/t, ex-Ganqimaodu stock with VAT, up by 200-250 yuan/t compared with the low levels earlier this month.

Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.