Coal flows reverse from east to west

Sergey Kondratiev, Deputy Head of the Economic Department of the Institute for Energy and Finance, commented to PortNews.ru on the export of coal from Russia.

Among the key factors promoting growth of shipments from the North-Western ports is the high loading of the Eastern Polygon making it unable to meet all the requests of coal companies, says Sergey Kondratiev, Deputy Head of the Economic Department at the Institute for Energy and Finance (IEF). Besides, discounts offered by Russian coal producers amid relatively high prices contribute to the recovery of the external demand for Russian coal.

“Shipments to Turkey, North Africa and India have increased considerably and part of those flows run via the Baltic ports,” he says.

According to the expert, the Leningrad Region ports retain their attractiveness due to a balanced tariff policy, redirection of flows from the Baltic states and overloading of the Eastern Polygon which is currently the main direction for transportation of containers.

The USA stopped importing Russian coal in February 2022, Australia – in April, the EU countries – from August. The Great Britain is going to stop purchasing Russian coal by the end of 2022. Japan and South Korea have announced their plans on gradual reduction of coal consumption. Still, Russia is the second country in the world in terms of coal reserves and the sixth in terms of production. Along with Indonesia and Australia it is among the three leading suppliers of coal – together they account for over 80% of the global coal exports.

According to the media reports, the government is considering introduction of discounts for railway transportation of coal to the North-Western ports which can help recover their loading. In the opinion of Sergey Kondratiev, even with the October dynamics of shipments, the issue of discounts is still relevant since the growth of flows to the North-West is driven by the absence of alternatives for coal producers amid the lack of the Eastern Polygon capacity rather than by the favorable market situation. 

“Meanwhile, coal prices are decreasing and the discounts for Russian coal reach 40-60%. Therefore, a discount of Russian Railways’ tariffs would be beneficial for coal companies,” he summarized.