The power industry of Ukraine faces tough times, entering the heating season with extremely low coal inventories at local power plants.
The country fails to form a sufficient amount of coal reserves to go through the winter period due to a high load on thermal generation amid insufficient supplies of imported material. According to Ukrenergo, coal stocks of Ukrainian power generating companies within a week (from November 01 to 07) decreased by almost 12% to 480 thousand t (w-o-w), while the established standard rate is 3 mio t. This is a critically low level, since in order to ensure the uninterrupted operation of generating enterprises for the next month, it is necessary to ensure the delivery of about 2-2.5 mio t of coal. Ukraine’s average level of coal stocks in January-November 2021 totaled 0.8 mio t, which is almost 3.5 times less than 2.7 mio t for the same period of 2020.
The main reasons for the current imbalance in the Ukrainian energy sector are the unprecedented rise in coal prices on the global market, insufficient production volumes within the country as well as an acute shortage of extra volumes of coal among most exporters, including Russia, the US, Colombia, South Africa and Poland. Moreover, the regular limitation of quotas for Russian coal exports to Ukraine also has a negative impact on supply volumes. Market participants admit that starting from November the situation may worsen owing to the probable restrictions for Russian anthracite and T grade coal shipments.
Due to high demand in China, some coal suppliers, including Russia, the US and Indonesia, focused their sales on this direction. As a result, the supply for consumers in Europe and the Middle East was reduced to a minimum by the end of Q3 2021. At the same time, Russian exporters face a shortage of railcars and difficulties in coal transportation both to seaports and overland border crossings, following a critically high load on the railway network, trying, first of all, to fulfill obligations under already concluded contracts.
In January-October 2021, Ukraine’s coal imports surged to 16.0 mio t (+2.1 mio t or +15% y-o-y).
Ukraine received 12.1 mio t or 76% of its coal imports from Russia, 2.8 mio t or 17% from Kazakhstan and 1.1 mio t or 7% from the US.
Russia banned thermal coal export, including anthracite, to Ukraine since November 01 and blocked rail freight traffic from Kazakhstan due to congestion on the Russian Railways (RZD) rail network.
Source: CAA Analytics