Black spot for black diamonds: redirection of Russian coal flows
The European Union has completely stopped coal imports from Russia, at least direct imports.
According to Statista’s analytics, key consumes of Russian coal over the recent years were China (29 million tonnes per year), S. Korea (23 million tonnes), Japan (21 million tonnes), Turkey (15 million tonnes), Taiwan (11 million tonnes), the Netherlands (10.5 million tonnes), Germany (10 million tonnes), Poland (10 million tonnes), Ukraine (9 million tonnes) and India (7.52 million tonnes).
Thus, the European countries including Ukraine accounted for 40 million tonnes of Russian coal per year which makes about one third of all foreign supplies.
As for Russia’s coal handling facilities on the Baltic Sea, the terminals in Ust-Luga can also accommodate Capesize bulkers and a terminal in Vysotsk – Panamax bulkers. Taking into account the size of bulkers, coal can be exported via Ust-Luga to India and China, the most promising markets in view of the European embargo. The terminal in Vysotsk can be used for exports to Turkey and North Africa.
In the first half of 2022, coal exports via Russian ports totaled 97 million tonnes, down 4%, year-on-year. Actually, coal exports have resumed via the ports of Russia’s Baltic neighbors which feature the most pronounced anti-Russian policy: in H1’22 the handled about 3 million tonnes of Russian coal.
Interestingly, coal handling in Russian ports of the Baltic basin decreased considerably in the first half of the year – by almost 22%, while its handling in the Southern basin rose by 29%. In absolute figures, the decrease in the Baltic basin and the growth in the Southern one is almost the same – about 5 million tonnes. In general, Russian ports decreased handled of coal by 3 million tonnes in H1’22. Those 3 million tonnes of coal were taken over by the Baltic states’ ports. Thus, redistribution of Russian coal flows featured two directions – Russian ports of the Southern basin from where exports to Turkey and North Africa are reasonable, and the above-mentioned ports of the Baltic states which seem to offer more advantageous logistics for some companies.
Most probably, the ban on import of Russian coal to Europe and the decision of Latvia's Parliament to declare Russia a state sponsor of terrorism will stop this cargo flow via the Baltics’ terminals. In our opinion, the capacity of Russia’s Baltic terminals is sufficient for handling those 6 million tonnes per year. Besides, there are dedicated facilities in Murmansk, both operating and under construction in Lavna. Besides, we can mention the project of Primorsky UPK terminal which is also supposed to handle coal, and the expansion of the Eastern Operating Domain which is to take over some cargo flows to the Far East. Admittedly, it is about the longer term.
The most promising basin for handling coal is that of the Far East. However, it cannot be used in full today – about a half of dedicated port facilities are not loaded due to insufficient capacity of the Eastern Operating Domain. According to Yury Trutnev, Deputy Prime Minister of the Russian Federation - Presidential Plenipotentiary Envoy to the Far Eastern Federal District, deficit of EOD railway capacity exceeds 100 million tonnes per year in 2022.
With the increase of the EOD capacity we expect the growth of export coal supplies to the Far East ports and a simultaneous decrease of exports via the North-West ports amid the European embargo. Even if Europe continues importing coal indirectly, it is likely to flow via Turkey or maybe Africa, hence possible growth of the demand for coal facilities in the Southern basin.