Russia Coal Mine Disaster Likely to Stall Asia Export Ambitions

May 18, 2010, 12:36 pm | Admin

From Bloomberg:

Russia Coal Mine Disaster Likely to Stall Asia Export Ambitions

2010-05-17 20:01:00.1 GMT


By Yuriy Humber and Maria Kolesnikova

May 18 (Bloomberg) — The deadly explosions that ripped apart Russia’s largest underground mine may stall ambitions among the country’s coking coal producers to expand exports of the steelmaking raw material to Asia just as prices soar.

OAO Raspadskaya’s 9 million-metric-ton-a-year mine in Siberia’s Kemerovo province, which was damaged by two blasts on May 8 and 9 that killed at least 90 people, may take years to rebuild, Chief Executive Officer Gennady Kozovoy said last week.

Raspadskaya and Russian rivals OAO Mechel and Sibuglemet targeted Asian markets in the past two years to diversify sales as local demand faltered. Now they may face state pressure to redirect exports to support steelmakers at home, said UralSib Financial Corp. analyst Nikolay Sosnovsky, citing the intervention in the coal market by Prime Minister Vladimir Putin following a supply shortage in 2008.

“If the situation’s not resolved, we’ll lobby for export duties,” Sergei Shatirov, a federal lawmaker for the Kemerovo region and first deputy of a parliamentary panel on industrial policy, said in Moscow.

Asia made up as much as 40 percent of Russian coking-coal exports in the first quarter, according to Renaissance Capital analyst Boris Krasnojenov. Russian output rose 41 percent to 16.2 million tons in the first quarter, with 3.5 million tons exported and 1 million tons going to Asia. Russia accounts for 6 percent of seaborne coal, according to UBS AG.


‘Tight’ Market

Steelmakers around the world have been restarting capacity in the past year and raw material prices have surged. In March, mining companies BHP Billiton Ltd. and Rio Tinto Group won a 55 percent price increase for coking-coal deliveries to Japanese steelmakers for this quarter.

The accident at Raspadskaya’s mine added “another couple of notches of tightness” to a “chronically tight” market in Russia and the Ukraine, and may spur coal imports by both countries, said Gerard McCloskey, the founder of McCloskey Group, a U.K. coal-research company.

Exports comprised 28 percent of Mezhdurechensk-based Raspadskaya’s sales last year, compared with 22 percent in 2008.

Kozovoy told the RBC Daily newspaper last month Asia may eventually account for as much as 45 percent of revenues.

The company signed supply contracts with South Korean steelmaker Posco and Japan’s JFE Holdings Inc. last year after previously being almost unknown in the region, said Alexander Pukhaev, an analyst at VTB Capital in Moscow.

“They didn’t have contracts; no one knew them,” Pukhaev said. “The Asian expansion was important because it gave them new sales options.”


Supply Gap

Raspadskaya sells coal in Russia for as much as 4,400 rubles ($144) a ton, excluding freight and tax, according to Ukrainian data provider Metal Expert. Russian coal was offered at $200 a ton at ports in the nation’s Far East in April, up 5 percent from March, Metal Expert data shows. Including transport costs of about $50 a ton, the difference between export and domestic prices is “slight,” Pukhaev said.

Faced with expanding demand in Asia, the Russian government may seek to “rein in” spot foreign sales abroad to help plug the gap in supply at home, said Morozov at UBS.

Russian miners should bear in mind what happened when the government intervened in the coking coal industry in 2008 after the country’s steelmakers were short of the raw material, said UralSib Financial Corp. analyst Nikolay Sosnovsky.


Mechel Plunge

Mechel, Russia’s largest coking-coal producer, lost half its market value in August of that year after Prime Minister Vladimir Putin said the company used foreign sales to minimize tax payments. It was later found to have broken antitrust laws.

“I don’t think they will want to repeat that,” Sosnovsky said in Moscow.

Mechel spokeswoman Ekaterina Videman and Raspadskaya spokesman Alexander Andreyev declined to comment. No one at Sibuglemet’s Moscow office could be reached for comment.

The fatal blasts at Raspadskaya’s Siberian mine, which shares the company’s name, led to a collapse of some of its 230 miles of underground passages in what is Russia’s biggest coal disaster since 2007.

Putin ordered an investigation. It will take at least six months for the first stage of reconstruction and another six months for the second and the total cost will be 6 billion rubles, Kemerovo Regional Governor Aman Tuleyev told Interfax.

On the same day as the second explosion at the Raspadskaya, pit, a blast at a Chinese mine in the Gansu province killed nine people. In April, an explosion at a West Virginia mine run by Massey Energy Co. killed 29, the worst mining accident in the U.S. in four decades.


–With assistance from Alistair Holloway in London. Editors:

Simon Casey, Tony Barrett

To contact the reporters on this story:

Yuriy Humber at +7-495-771-7743 or;

Maria Kolesnikova in Moscow at +7-495-771-7707 or

To contact the editor responsible for this story:

Simon Casey at +44-20-7673-2631 or

Last modified on February 1, 2017, 12:37 pm | 1964