With the ever worsening Russia-Ukraine crisis, Russia seems likely to direct some metallurgical coal exports to Asian users, which is expected to meet the European market.
According to data released by Russia's Federal Customs Service, the country exported 31.81 million tons of coking coal last year, with shipments to Ukraine reaching 6.82 million tons, with 9.31 million tons delivered to the second destination China.
According to customs data, Russia also exported coal to some other countries, primarily the Netherlands, Turkey, Morocco and Poland, with shipments of 1.18 million, 0.52 million, 0.25 million and 0.24 million tons, respectively, in 2021.
Although the Netherlands, Morocco and Poland are far from the tension zone, the coking coal trade flow from Russia to Turkey may be affected if the conflict affects normal operations in ports in the Black Sea.
Coal trade between Russia and Europe is less likely to stall, but deliveries to Ukraine and neighboring countries on a line are likely to be mixed, although the effect remains to be seen depending on the geographic spread of the conflict. However, most of the supply could go to Asia, which is the largest market for coking coal.
Three of the top five destinations for Russian coking coal in 2021 were from Asia, primarily China, South Korea and Japan. The data showed that shipments to the three countries accounted for 16.2 million tons, 50.9% of Russia's total exports.
Exports to China are likely to increase in line with the country's overall coal export guidance.
Russia plans to increase its coal exports of all types to China to 100 million tons in 3-5 years, a sharp increase compared to 52 million tons in 2021, according to the news, citing Sergei Mocharynikov, an official at the Russian ministry of energy.
Russia is expected to produce a record 450 million tons of coal in 2022, up from 436.65 million tons the previous year, as part of its efforts to increase export revenues.
High-quality coking coal, the main steelmaking material, is actually deficient in China due to its self-sufficiency and relatively higher dependence on imports.
China's coking coal imports from Russia have increased for four consecutive years, with shipments rising to 10.73 million tons in 2021 and more than doubling in volume in 2018, according to China's customs data.
Russia has become China's second-largest source of coking coal after a trade crisis with Australia froze coal trade between the two countries. The ongoing severe pandemic situation, which has restricted imports from Mongolia, also raises the possibility of reaching other major sources, including Russia.
Import interests of Chinese buyers are expected to increase, given the bullish outlook for close demand from downstream sectors, which is also pushing up local coking coal prices.
More auctions are heard to settle in Shanxi, with higher prices and trading volumes.
A source with a Luliang-based mine in Shanxi has increased its offer of medium sulfur-poor primary coking coal (S 1.2%, G 79) by 220 yuan/tonne from the end of last week, ex-works with VAT, 2,120 yuan/t. increased by 320 yuan/tonne cumulatively since the end of the Lunar New Year holiday.
Sxcoal learned that low and medium sulfur primary coking coal at a major mine in Liulin in Shanxi has climbed 330 yuan/t so far this week, encouraged by the rising appetite of coking plants.
With stronger offers and higher demand in the domestic market, Mongolian coking coal offers also gained support at the Ganqimaodu border crossing in Inner Mongolia.
Mongolia crude coking coal offers stood at 2,000-2,010 yuan/t ex-Ganqimaodu VAT inclusive yuan/t, up 200-250 yuan/t compared to the low levels earlier this month.
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