Commodities

By Stocksak: Infrastructure bottlenecks prevent Russia from exporting its booming coal to China


© Stocksak. FILE PHOTO – A worker stands near a cutting machine of an excavator at Borodinsky Opencast Colliery, owned and operated by the Siberian Coal Energy Company, (SUEK), Russia, April 19, 2022. REUTERS/Alexander Manzyuk

Maxim Nazarov and Muyu Xu

SINGAPORE/MOSCOW (Stocksak – While Russian coal exports to China are up by about a third this past year, the supply boom is being limited by transportation infrastructure limitations, officials and industry sources said.

China is seeking overseas coal supplies, particularly after recent COVID-19-related outbreaks in the major coal mine regions of Inner Mongolian and Shaanxi. As winter approaches, the coal demand for power generation and heating sectors will rise.

The Kremlin intends to increase its energy supplies, especially to China, to offset a slump of exports to the West. This is due to sanctions being imposed on Russia for the conflict in Ukraine.

Russia is the sixth-largest global coal producer and top exporter of coal, alongside Australia and Indonesia. With a supply of 223,000,000 tonnes, Russia’s share of global coal exports was 17%.

Now, however, there are more exports going east to Asia than west to Europe. This is creating bottlenecks.

“Many of our employees were informed by the sellers that loading and arrivals would be delayed, which can cause problems for our business,” said a Chinese coal trader.

Another source stated that traders were simply informed by miners or sellers that a coal shipment was being cancelled due to insufficient rail capacity. It could be delayed for weeks.

Andrei Belousov, Russian First Deputy Prime Minster, has acknowledged the problems with infrastructure constraints. He said this month that although the situation with coal exports had improved, it had not stabilized.

According to China’s customs data, China’s coal imports to Russia decreased to 6.95 Million tonnes last month, from an August peak of 8.54 Million tonnes.

Russian transport industry sources claim that Russia has increased coal supplies by railways to China by around a third this past year to 27.6 millions tonnes in the January-August period.

WINTER DEMAND

However, deliveries are slower due to increased cargo traffic.

Stocksak analysis shows that it took 12.6 days to deliver a coal cargo in Siberia from Siberia’s Kuzbass fields to Russia’s Pacific ports in July and September, compared to 11.3 days average for the same period lastyear.

According to Stocksak analysis and railway data, delivery times in Russia have increased by a fifth (or 1.4 days) on average. However, timings could increase in winter because of rail congestion and port capacity limits.

According to a Chinese coal trader: “We would expect China’s Russian coal imports to decrease due to cool weather, which will reduce port loading and the rail logistics cap to help to put a stop to,”

According to the Energy Ministry, 49 million tonnes of Russia’s total 223 million tonnes of coal exports were sent to Europe last year.

Russia is now expecting its coal exports in the next years to fall due to Western sanctions over the Ukraine conflict and U.S. European Union and British embargoes against Russian coal imports.

Russian government estimates that coal exports will fall by 22% this year, and by 31% in 2023.

But, at the same moment, the eastbound export rush is slowing down.

“A lot railcars accumulate, congestion forms at port stations… Turnarounds for railcars have been increasing significantly.” According to a Russian transport industry source, shippers are searching for empty railcars.

Russian Deputy Prime Minister Alexander Novak stated that Russia plans to increase its infrastructure capacity, including its eastern ports. Russia’s capacity is expected to grow by between 55 million tonnes to 211 million tonnes per annum by 2031, from 150 million tonnes currently.

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Stocksak Editorial

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