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Russian Metallurgical Coal Producers Target Asian Market

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Asia-Pacific region will be the key market for Russian coal producers as they try to make inroads where Australian supplies have typically dominated.
Russian metallurgical coal producers are seeking to grab market share from Australian and US competitors in Asia, using the cost advantage and unique specifications their coals have over the rest, participants said at the Coaltrans Anthracite & Coking Coal event in Hong Kong Monday.
“Russian producers have distinct advantages over Australian and North American [coal] producers since their full cash costs are in the first quadrant of the global cash coals curve,” Dmitry Suschov from Russian mining company Krasnobodskiy Yuzhny LLC said.
Russian cash costs are one of the lowest, Dmitry said, and much of this has to do with the weak ruble, which has greatly enhanced the attractiveness of Russian grades for export.
The Asia-Pacific region will be the key market for Russian coal producers as they try to make inroads where Australian supplies have typically dominated.
Russian coal is gaining ground in Asia, with the region’s share of total exports from the country rising from 23% in 2009 to 53% in 2015, Dmitry said.

Asia will also be the key target region for the Russian Yakutia project, eyeing customers all the way from Japan to India, according to Lilia Wernli, chief commercial director at Russian coal producer Kolmar Coal Mining Company.
Increasing demand from a traditional anthracite net exporter, Vietnam, has also made Russian producers refocus their attention to Asia, Dayan Akhmerov, head of sales at Russian coal production company Krunch LTD added.
Russia is the fourth-largest metallurgical coal exporter in the world — and exported 25.2 million mt in 2015, accounting for 8% of the world’s coking coal exports, according to data from a CBA report in April 2016.
Investments in logistical infrastructure will also help make Russian coals more cost viable, Wernli said.
Kolmar Coal Mining is currently constructing a terminal to handle coal in Muchka Bay, Vanino, Far east Russia. The terminal would be able to handle Capesize vessels from 2020, which would lower logistical costs for moving coal to the East. The Russian Federation has made Kolmar’s project in south Yakutia a “priority development,” with support of the Russian Railways and other ministries, Wernli said.
Russian coals also have unique properties making them attractive for end-users in Asia — Kolmar’s Inaglinsky and Denisovsky coals have high maximum fluidity from 20,000 to 40,000 ddpm, Wernli said. Maximum fluidity is a measure of the coal’s ability to coalesce or melt before reforming as a solid.
Russia also has anthracite fines with one of the lowest ash and sulfur content in the world, Greg Driscoll, president of US anthracite producer, Blaschak Coal Corporation said.

However, major obstacles like import taxes and coal quality restrictions remain for Russian suppliers shipping into top consumer China.
Russian volumes into China plunged for the second consecutive year in 2015, from a peak of 8.4 million mt reached in 2013, Chinese customs data showed.
In 2015, Russia exported 3.2 million mt of metallurgical coal to China, the data showed.
Certain grades of low-vol Russian PCI still incur an import tariff of 6% in China, and Beijing’s requirements on trace elements like fluorine will also prove to be a hurdle for Russian coals, sources said.
Russia’s persistently high domestic rail costs, as well as logistical difficulties during winter could also limit its export ambitions, sources added.
Russia is a large supplier of PCI to Europe, and demand has picked up recently in Brazil. Higher PCI pricing had supported purchasing decisions by Brazilian mills to buy more from Russia, a supplier said. Higher pricing had been achieved for third quarter loadings of mid-vol low ash PCI in Atlantic market compared to Q2, he added

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