(Montel) Russia has a “massive” accumulation of coal on routes and depots leading to Black Sea ports due to the EU’s import ban and flagging demand from key buyer Turkey, traders said.
A Russian coal trader agreed. “It’s all a massive traffic jam,” he said but added that it was unclear how much coal was involved. “I’ve no clue, but I guess it’s a lot.”
China and India were potential customers for the stranded material, but Russian asking prices would need to drop considerably to become competitive in Asia, the Russian trader said.
He said Turkey was only willing pay USD 95-100/t for cargoes, whereas the Ukrainian trader said Russian sellers were offering supplies at USD 35-45 above this level.
For comparison, the Atlantic benchmark Des ARA coal index – which reflects coal for delivery in northwest Europe – was assessed by broker Global Coal last at USD 128/t.
However, a spokeswoman for state-owned rail operator Russian Railways (RZD) downplayed any logistical concerns, noting “there are not any restrictions on the part of Russian Railways”.
RZD data showed coal rail deliveries to ports in the first quarter rose nearly 13% on the year to 47.6m tonnes – accounting for 55% of all railed goods. But the spokeswoman said it was not possible to say how much of this volume was shipped to southern ports.
However, vessel tracking data – provided by dry bulk data provider DBX – showed the key Russian Black Sea export hubs of Taman and Novorossiysk exported a combined total of 8.5m tonnes in the first four months of 2023, down from nearly 10m tonnes in the same period last year.
Of the total, around 1.3m tonnes was earmarked for Turkey, while 2.7m tonnes was destined for South Korea, 2.5m tonnes for China and 0.7m tonnes for India.
“A lot of mines maxed out railing capacity when prices were high,” said Alex Claude, CEO of DBX.
Some vessels were currently laden in the Black Sea, but without a specified destination, he said, adding however the backlog would likely clear once exporters accepted lower prices.
“Russian exporters are getting bids from Chinese and Indian buyers, so everything will clear out, just at a lower price,” he said.
However, DBX data showed there was no vessel congestion around the port of Taman, which is situated on the Kerch Strait between the Sea of Azov and the Black Sea.
“Maybe [Russian exporters] already have too much on the water, without a home, so they are looking for the market to pick up before chartering more ships to load,” Claude said.
An EU-wide ban on Russian coal imports was imposed from last August, in response to the war in Ukraine. Europe previously imported 60-70% of its thermal coal from Russia.
A global excess of coal, amid sluggish demand in both the Atlantic and Pacific basins, has seen front-quarter API 2 prices slump this week to two-year lows of USD 93/t.