Due to systemic issues with transportation through the railway network of Russian Railways (RZD), the decline in Russian coal exports is accelerating. In January-September 2024, exports were 15.0 mio t or 9.3% less than in January-September 2023. It is forecasted that in 2025 the negative trend will continue.
In October 2024, the maximum drop was recorded in railway loadings to the terminals of the North-West and South. On some days, RZD virtually did not perform coal transportation to the terminals of Ust-Luga.
The forecast for coal deliveries to Taman in October 2024 is 0.8 mio t (decrease by 1.2 mio t or 60% to the level of 2023). The forecast for coal supplies to Ust-Luga in October 2024 is 2.1 mio t (decrease by 0.7 mio t or by 25% compared to 2023).
The current disruption of shipments to the OTEKO’s port of Taman is not related to suppliers’ negotiations with the terminal. Coal companies agreed with OTEKO on transshipment terms as early as June 2024. Furthermore, current requests for coal transportation to Taman indicate stable demand for handling at the terminal.
Because of under-supply, coal stockpiles in loading ports are close to zero, increasing the idle time of vessels awaiting cargo. In this situation, exporters are forced to postpone delivery obligations towards customers to future periods, bringing risks of losing key remaining markets for Russian coal suppliers, for example, the Turkish market, where Russian coal has been able to successfully replace the main supplier – Colombia since 2022.
Given the disruption of shipments by RZD and Russian exporters’ inability to fulfill foreign trade obligations on coal supplies in a timely manner, today we observe the opposite trend of substitution of Russian coal by Colombian material: in January-August 2024, the share of Russian suppliers in the Turkish market decreased from 71% in 2023 to 61% in January-August 2024.
Thus, Russian exporters will not be able to take advantage of higher westbound prices in Q4 2024 (+27 USD/t to the minimum API2 index level in 2024: 118.3 USD/t current level to 91.3 USD/t in mid-February 2024), leading to even more losses for the industry in 2024.
Moreover, the loss of market share in Turkey is set to boost losses in subsequent periods. Following the sanctions and the closure of the European market for Russian coal, the next “nearest” market for domestic exporters is India, where the freight is 20 USD/t higher, than to Turkey from Ust-Luga.
October saw a record number of abandoned laden coal trains on the RZD network, which is practically paralyzed. Some loaded trains have been idle for more than a month waiting for traffic.
The trend of shortage of locomotive crews continues (unofficial reason – idle locomotives caused by insufficient number of locomotive crews resulting from low salaries in RZD).
First of all, coal exports from Kuzbass, Khakassia and the Novosibirsk Region are decreasing by a total of 15 mio t in January-September 2024 (y-o-y). Insignificant positive dynamics are observed only in Yakutia and the Far East.
Export shipments from Kuzbass plummeted by 27 mio t or 16% vs. 2021.
Out of 130 Russian coal mining enterprises 64 are unprofitable (data as of August 2024).
Source: CCA Analysis
