(CAA Analytics) Russian Ministry of Energy has proposed to subsidize the interest rate and roll over loans of OTEKO coal terminal in Taman, owned by Michel Litvak, to increase coal export through the terminal. Under the report addressed by the Ministry to Vladimir Putin, state subsidies may reduce the terminal’s loan burden while decreasing the handling rate to 8.0 USD/t from current 14 USD/t. In addition, the Ministry proposed to increase the rail tariff discount to 42.7% from current 12.8%. According to the Ministry, these measures may boost OTEKO’s annual throughput up to 25 mio t.
Russian Railways commented that it had already provided maximum tariff discounts for coal shipments to Southern ports since March 2020, both in terms of the rules set by the regulator and economic feasibility. The deputy head of the Federal Antimonopoly Service (FAS) Alexander Redko says, the idea of spending budget funds to support a commercially successful private port, operating in a competitive environment, needs to be substantiated from government.
According to experts, a reduction in the cost of coal handling to 8 USD/t may not be sufficient amid the volatility of coal prices in the European market and the risks of coal phase-out by the EU countries. Thus, reducing railway tariffs for coal transportation to the ports is the only way to prevent further decline in coal production, which was cut by roughly 9% in January-July 2020.
Calls to increase rail tariff discounts westwards and southwards have been heard since spring 2020. In March, the FAS offered Russian Railways to provide discounts of up to 99%, later the figure was adjusted to 16-55%. Russian Railways opposed the proposals, referring to the emergence of unreasonable expectations in the market.
Follow CAA Analytics on Twitter:
[tfws username=”CAA_Analytics” height=”700″ width=”350″ theme=”light” color=”#FAB81E” tweets=”2″ header=”yes” footer=”yes” borders=”yes” scrollbar=”yes” background=”yes”]
The Coal Hub is an online platform for sharing analysis and information about the global coal market more info
Sign up to receive our weekly newsletter (each Monday) with new coal market reports, presentations & analysis.
By signing up, I agree to our TOS and Privacy Policy.
© 2020 TheCoalHub | All Rights Reserved
