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Russian Baltic coal exports to Asia surge 32% in 2019

Russian long-haul coal exports to Asia from the Baltic Sea surged more than 30% year on year in 2019 due largely to insufficient European demand, more attractive Pacific-basin prices and low freight costs.

Exports of predominantly thermal coal from Russia’s main European export hub of Ust-Luga, near St Petersburg, to Asian destinations totalled 5.42m tonnes, according to vessel-tracking data, provided by Arrow Shipbroking Group.

This compared with 4.1m tonnes shipped in 2018.

Ust-Luga – which ordinarily provides an outlet for Russian coal to European destinations, particularly Amsterdam, Rotterdam or Antwerp (ARA) – loaded 1.8m tonnes for export to Israel, representing a 27% year on year rise, while 1.4m tonnes went to India, up by 3%.

The remainder was exported to Malaysia, China, Vietnam and South Korea.

The increase was partially due to bulging stocks at ARA import terminals, which averaged 6.77m tonnes in 2019, nearly 30% higher than in the previous year.

This was thanks mainly to a weak utility appetite for the fuel, as an abundance of competing gas and a number of coal-fired plant closures – particularly in the UK – eroded demand.

Furthermore, there was a considerable spread between Atlantic and Pacific benchmark coal prices, which – along with low freight rates for much of the year – encouraged such arbitrage shipments.

The Asia-Pacific benchmark Global Coal Newcastle index last year averaged a USD 16/t premium to the Atlantic basin’s Des ARA index, reaching a peak of nearly USD 30/t earlier in the year.

Closing arbitrage
But the spread narrowed to an average of just USD 11.50/t in the last three months of the year, contributing to a sharp drop in such long-haul shipments.

Just 460,00t were exported to Asian destinations in the last quarter, with only 70,000t recorded in November-December – a coking coal cargo shipped via the Suez Canal to South Korea.

A coal analyst with a European utility said the decline could also have reflected cargoes being shipped to Asia via ARA terminals, so they were not initially recorded as having Pacific-basin destinations.

Furthermore, there was an overall decline in shipments from the port in the final months of the year, with total loadings to all destinations falling to around 52,000t/day in December, from 63,000t/day in November and 81,000t/day in October.

Ust-Luga terminal exported 24m tonnes of coal last year, up sharply from 2018’s 19.9m tonnes, due largely to port infrastructure upgrades, according to operator Rosterminalugol.
Source: Montel

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