Argus Russian Coal TWICE MONTHLY Volume V Issue No 20 Friday 15 October 2010

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Argus Russian Coal TWICE MONTHLY Volume V Issue No 20 Friday 15 October 2010 www.argusmedia.com Argus Russian Coal TWICE MONTHLY Volume V Issue No 20 Friday 15 October 2010 Exports show mixed results Monthly average prices* $/t Russian seaborne coal exports are showing a decline on last year fob Baltic fob Yuzhny fob Vostochny but remain higher than in 2008. In January-September 66.9mn t of Sep 90.8 95.0 101.7 coal was dispatched from the ports compared with 70mn t in the Aug 90.8 95.2 104.0 * 6,000 Kcal NAR, up to 1% sulphur, delivery in 90 days same period of 2009 and 61.8mn t in the same nine months of 2008. Shipments to Asia this year are significantly higher than in the Coal export dynamics: Major northwest ports ’000t previous years although they are obstructed by railway problems. Murmansk Ust-Luga Riga In September less than 2.6mn t was shipped through the far east 1,200 ports compared with 3mn t in August 2010 and the same amount 1,100 in September 2009 (see table p2). The largest far east outlet, 1,000 Vostochny port, handled just over 1mn t — but part of the sched- 900 800 uled tonnage failed to arrive as a result of the railcar shortage and 700 lack of coal, the port says. But the nine-month figure for the far east 600 ports dwarfs the results of 2009 and 2008 (see chart p9). 500 Exports to northwest Europe increased compared with the pre- 400 vious months to nearly 3.6mn t in September, and many ports were Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep 10 able to reduce their accumulated stocks. The Black Sea market appears to be balanced. Exports of Russian seaborne coal exports by destination, Sep Russian coal through the ports of the Azov and Black seas remain stable from month to month and compared with last year. Far east 34% In this issue Northwest Data: Russian seaborne coal shipments in September 2 47% Reform boosts rail rates 2 Poland’s Barter ramps up imports 3 Special report: Far east 4-9 South 19% Data: Coal rail shipments in September 10-22 Russian seaborne coal exports mnt Northwest ports Far east ports South ports 9 8.0 8.0 7.9 8.0 8 7.8 7.9 7.6 7.3 7.4 7.5 7 6.8 6.4 6.3 6 5 4 3 2 1 0 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep 10 Page 1 of 22 Copyright © 2010 Argus Media Ltd Argus Russian Coal — Infrastructure Issue No 20 Friday 15 October 2010 Russian seaborne coal shipments ’000t Reform boosts rail rates Jan-Sep Sep 10 % change % change Russia is rapidly nearing full liberalisation of the rail transport mar- 10 Northwestports ket — amid the railcar shortage and galloping rail rates. Russian ports State-owned rail operator RZD’s new subsidiary VGK began Murmansk 1,012.2 22.8 7,505.2 -20.9 operating on 30 September. The remaining state-owned railcar Kandalaksha 74.0 -11.1 630.9 -24.2 fleet will be transferred to VGK by the fourth quarter of 2011 Ust-Luga (Rosterminalugol) 626.3 4.4 5,206.8 2.1 — putting an end to the provision of transport services at regulat- Ust-Luga (UCL) 117.5 14.0 1,028.9 156.7 ed tariffs. The railcar transferral process has already started and Vysotsk 191.8 64.8 1,659.9 -25.8 is said to have contributed to the railcar shortage in the market. Vyborg 10.6 -74.2 59.5 -85.2 Over 156,000 railcars will be transferred to VGK. St-Petersburg 194.0 13.6 1,726.0 -11.7 “The railcars transferred to VGK either disappear from the Arkhangelsk 36.1 36.7 210.3 175.6 market or become more expensive,” according to one industry Kaliningrad* 31.0 -29.1 371.0 63.4 source. Many industry participants are convinced that RZD is Total Russian 2,293.5 14.2 18,398.5 -11.2 Ports of the Baltic countries responsible for deliberately creating the railcar shortage to boost Riga* 924.0 -1.9 8,479.0 -23.2 rail rates. Ventspils* 228.5 -37.4 2,701.6 -35.0 The railcar shortage cannot be explained just by increased Tallinn* 148.0 -28.2 1,173.0 7.4 cargo traffic because traffic has so far not reached the level of Latvia & Estonia Total 1,300.5 -14.0 12,353.6 -24.1 2008. Cargo traffic increased by 9pc year on year in January- Totalnorthwest 3,594.0 2.1 30,752.1 -16.9 September in Russia but the decline in January-September 2009 Southernports on the same period of 2008 was 19.5pc, according to RZD. Russian ports Meanwhile, rates charged by private rail operators have Tuapse 218.0 -36.5 2,504.4 12.3 increased rapidly during the past few months supported by a Temryuk 83.8 20.1 533.0 -45.5 shortage of rolling stock. They are now assessed as being about Taganrog* 78.8 -9.6 617.9 6.6 18-20pc higher than the regulated tariff for each route. And some Yeysk 86.5 62.0 661.1 51.0 coal companies complain of even higher rates. Azov* 57.5 -52.8 886.9 22.5 “Rates have nearly reached the pre-crisis level,” a source Rostov* 114.5 53.7 900.7 203.0 Total Russian 639.1 -14.8 6,104.0 16.3 with a private rail operator says. He confirms that his company Ukraine’s ports increased its rates twice in the past three months. “We did it in CSP Yuzhny 355.2 56.9 2,150.7 -3.8 line with the [transport services] market,” he says. TIS (Yuzhny) 132.5 na 646.7 na With the formation of VGK there are two major players in the Kerch 34.9 -65.6 440.6 -65.3 rail transport market — RZD subsidiaries PGK and VGK — and a Mariupol 150.0 31.6 1,300.0 30.8 number of private rail operators. Many big cargo holders, includ- Nikolayev 28.6 -76.9 518.4 -28.8 ing steel and coal producers, have their own transport companies Berdyansk 9.6 na 49.1 5,355.6 and railcar fleets. Izmail 66.7 -40.4 718.9 9.7 VGK says it will charge rates at below market level in 2011. Ukraine total 777.5 14.8 5,490.0 -12.2 This is normal business practice for a company that is entering Totalsouth 1,416.6 -0.8 11,594.0 0.8 the market and needs to win clients, industry observers say. But Fareastports rates are expected to increase by at least 9pc from January 2011 Vostochny 1,036.6 -27.9 10,822.3 -1.1 — when the government increase in rates for the infrastructure Maly port/Vostochny 95.0 33.6 963.0 5.4 Vostochny Lesnoy 5.1 na 195.6 138.2 component comes into force. Any further growth will be deter- Posyet 348.0 8.4 2,521.0 -2.0 mined by the market. Vladivostok Rybny 0.0 na 172.1 131.0 The shortage of railcars is also at least partially caused by Vanino 88.5 -46.4 1,039.7 8.9 the problems with traffic management that RZD has owing to Vanino/Daltransugol 593.9 0.3 5,843.9 65.5 the increase in the number of private railcars on the network. To Nakhodka* 312.2 69.5 2,251.9 25.5 cope with this problem RZD is offering to rent railcars from big Sakhalin* 111.5 1.1 742.1 10.4 cargo holders and private rail operators and take responsibility for Totalfareast 2,590.8 -15.1 24,553.3 14.0 their operation. But this proposal has met with little support from Grand total 7,601.4 -5.0 66,899.4 -4.5 market participants. Page 2 of 22 Copyright © 2010 Argus Media Ltd Argus Russian Coal — Rail exports Issue No 20 Friday 15 October 2010 Rail shipments of Russian coal for export* ’000t Poland’s Barter ramps up imports Sep 10 ±% 10/09 Jan-Sep 10 ±% 10/09 Polish private-sector trading firm Barter plans to import about Northwestports 2.5mn t of Russian coal in 2011, compared with at least 1.5mn t Russian ports this year and 850,000t in 2009. The firm’s recent purchase of a Murmansk 848.9 -8.6 8,183.1 -21.4 Ust-Luga 938.7 12.7 7,210.2 18.5 facility to store up to 500,000t of coal in the centre of Poland will Vysotsk 264.3 55.5 1,798.1 -21.0 help it to expand sales. St Petersburg 188.8 18.0 1,624.4 -19.9 Barter is by far the largest importer of Russian coal among Arkhangelsk 39.5 30.8 247.9 131.0 Polish trading firms. But it is outpaced by Russian major coal pro- Vyborg Kandalaksha 99.2 12.9 754.2 -23.1 ducer Suek, which is said to have contracts with Polish customers Kaliningrad 11.5 4.9 89.6 11.1 for about 2.5mn t this year. Total Russian ports 2,391.0 5.4 19,907.5 -11.1 Barter sells coal mainly to households and small industrial Baltic countries consumers.
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