According to the Ministry of Energy, coal supplies from Russia to Europe and the countries of the Asia-Pacific region have grown by 12% since the beginning of the year. The demand for coal has increased due to a shortage in the global gas market. Izvestia figured out whether the trend will be long-term.
The world is waiting for coal
According to the estimates of JSC Rosinformugol, provided to Izvestia, the consumption of Russian coal in the external market in 2021 will increase by 8% compared to the previous year and will exceed 220 million tons. times, foreign exchange earnings will grow by almost 19% and will exceed $ 15 billion, which is $ 2.15 billion more than in 2020.
Energy Minister Nikolai Shulginov said that coal supplies from Russia to Europe and the countries of the Asia-Pacific region (APR) increased from the beginning of the year by 12% compared to last year. According to the latest data, coal exports from Russia increased in the first half of the year by 10.3%, to 101.9 million tons (by $ 6.842 billion).
In Europe, the rise in natural gas prices is pushing some consumers to switch to lignite and brown coal. The research structure BofA Global Research states: European companies are switching to the scarce coal market due to the rise in prices for blue fuel, where prices are also inexorably renewing records. For example, European thermal coal API2 and Australia’s Newcastle recently hit their all-time highs “due to the global gas crisis”: their price exceeded $ 250 per tonne. Coal supplies to the UK from Russia almost tripled in the first half of the year and approached the pre-crisis level of 2019. At the same time, power plants in India are now experiencing an acute shortage of coal for the needs of electricity production.
Photo: RIA Novosti / Vitaly Timkiv
– Today Russia is one of the main suppliers of coal to the international market, – says Dmitry Bogdanov, general director of the coal mining company GK Karakan Invest. – The current steam coal market can be roughly divided into two sectors: the high-calorie and low-calorie coal market. Currently, both in Europe and in Asia, there is a stable demand for high-calorific coal. In these markets, the Russian Federation is one of the main players, since Russian coal fully meets the demands of European and Asian consumers in quality and is superior in quality to raw materials, for example, from Indonesia.
Vyacheslav Kulagin, head of the Department for Research of the Energy Complex of the World and Russia at the Institute for Energy Research (ERI RAS), points out that the increase in external prices and volumes of coal exports leads to an increase in the income of coal companies and the amount of taxes paid.
– Our exports have grown not only in comparison with 2020, when there was a recession, but also in comparison with more favorable 2018-2019 years, – says Vyacheslav Kulagin. – But the overall effect for the country is more complex. The growth in exports with a smaller increase in production led to a reduction in coal supplies to the domestic market.
As a result, the ERI RAS specialist continues, the missing volumes had to be closed at the expense of other sources, primarily gas. And this led to a decrease in opportunities for gas export in a favorable price environment, the expert notes.
Photo: RIA Novosti / Vitaly Timkiv
“At the same time, there is an increase in coal prices on the domestic market,” states the head of the Research Department of the energy complex of the world and Russia. – This is not critical for export-oriented consumers, since coal will be more expensive for competitors abroad, but for other categories this is a direct increase in costs.
“Indirect effects will be positive”
Sergey Kolobanov, Deputy Head of the Economy of the Fuel and Energy Complex Sectors of the Center for Strategic Research (CSR), explained to Izvestia that federal budget revenues from the coal industry are actually quite modest. According to the tax service, in seven months of 2021, coal mining generated 37 billion rubles in tax revenues (for comparison, the extraction of metal ores gave a total of 183 billion rubles for the same period, and the oil and gas industry – 4.7 trillion rubles).
– In addition, it should be noted that there is no export duty on coal, – says Sergey Kolobanov. – Almost half of the taxes on coal mining (18 billion rubles) are formed by the profit tax, and only in this part the Russian budget can be replenished with additional revenues with an increase in coal prices and, accordingly, the profits of coal mining companies. Other taxes do not depend on coal prices, but export growth will increase the volume of production and the total amount of the mineral extraction tax (for seven months of this tax, almost 8 billion rubles were received).
Thus, the expert draws attention, “the growth of coal exports from Russia does not imply significant direct economic benefits, but the indirect effects will, of course, be positive.”
Photo: RIA Novosti / Evgeny Epanchintsev
“This is, first of all, increasing the investment opportunities of coal mining companies by increasing profits,” emphasizes Sergey Kolobanov. – This is an increase in the load of transport and transshipment capacities and, accordingly, tax revenues from enterprises in this area. And finally, this is an opportunity to accelerate the monetization of our coal reserves, the prospect of efficient use of which in the long term in the light of low-carbon global trends is rather pessimistic.
In this he is echoed by Stanislav Mitrakhovich, a leading expert of the National Energy Security Fund (NESF), a senior researcher at the Financial University.
– The demand for coal will gradually fade, – he thinks. – Gas and renewable energy sources are gradually starting to displace coal from the market. I think that within ten years the current income from coal will not be obtained.
“How long-term the trend for the growth of demand for coal will turn out to be is difficult to say for sure, but, most likely, it will continue in the near future,” said Viktor Khaikov, Chairman of the Board and President of the National Association of Oil and Gas Services.
Photo: RIA Novosti / Evgeny Epanchintsev
– In the same time Russia takes into account long-term trends in the coal market and a possible scenario of a decrease in demand for it, – says Viktor Haykov. – To this end, strategies are already being developed to diversify the main coal-mining regions in order to compensate for the potential loss of income and changes in the structure of employment of the population.
Will demand continue to grow
The demand for steam coal in the Asia-Pacific region in the medium term (until 2025) will grow due to the increase in energy consumption in China and India, says the general director of INFOLine-Analytica Mikhail Burmistrov.
– The demand for coking coal will also grow, both in Europe and to a greater extent in Asia, amid increasing demand from metal-intensive industries, – Mikhail Burmistrov is convinced. – Therefore, investments in the coal sector are relevant, especially in the segment of coking coal and anthracite mining, which is confirmed by the active implementation of large projects.
However, in his opinion, the development of the coal sector in Russia in the medium term will be slowed down primarily by the limitations of the transport infrastructure (due to the carrying capacity of the Eastern landfill and the capacity of transshipment complexes).
At the same time, Mikhail Burmistrov continues, the reduction in demand for thermal coal in the horizon after 2030 due to the transition to carbon neutrality can be partially offset by an increase in the share of enriched coal in exports and the development of concentrator capacity in Russia, as well as the priority growth of coking coal production. coal and anthracite, the demand for which will grow in the horizon after 2030.
Photo: RIA Novosti / Ilya Naymushin
It is important to understand that the coal market is cyclical. Cycles of deep recession are followed by cycles of growth. Market growth peaks were already observed in 2008, 2011, 2018. The same thing happens with investments during periods of recession and growth. As soon as companies receive additional profits, some of this profits are invested in assets, and, accordingly, as soon as the recession begins, companies launch “survival programs”. Therefore, investments in the coal sector are now relevant and will remain relevant throughout the current year.
– Investments are directed not only to the creation of new capacities, but first of all to the maintenance of existing ones, including export-oriented companies, – says Anatoly Rozhkov, Science Director of Rosinformugol JSC. – It should be noted that in accordance with the current Program for the Development of the Coal Industry of Russia for the period up to 2035, strategic investments are directed to the creation of new coal mining centers in the East of the country in order to bring coal producers closer to the promising export markets of the Asia-Pacific countries.
The current demand situation demonstrates the existence of “windows of opportunity” for the coal industry, accentuated by Vyacheslav Kulagin.
– But the reality is this: the export niche in the European direction is already steadily decreasing, despite short-term drops in imports, – says a specialist at ERI RAS. – In the Asian direction, of course, there is a temporary potential even for increasing supplies, which will then be replaced by a recession.
Izvestia sent inquiries about the real situation in the domestic and foreign coal markets to the Ministry of Energy, Siberian Coal Energy Company (SUEK), Ural Mining and Metallurgical Company, Kuzbassrazrezugol Management Company, JSC HC SDS-Ugol, PJSC Raspadskaya, Kuzbass Fuel Company, Russian Coal JSC, Sibanthracite Group and a number of others. At the time of publication of the material, no replies had been received.