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Kuzbass Fuel Co. and Russian Coal announce 1Q21 results

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World Coal,

As announced in the March energy newsletters of the Analytical Center for the Government of the Russian Federation, coal production in January – March 2021 (1Q21) increased by 8.5% compared to the same period in 2020, amounting to 108.136 million t. Supply to the domestic market also increased by 3.9%, to 47.14 million t and export deliveries-by 14.4%, to 47.42 million t, according to the information of Central Dispatching Department of the Fuel and Energy Complex (CDU TEK).

According to the Russian Ministry of Energy, this export growth is associated with an increase in global demand for metallurgical coal, in particular in China, which is connected to the reinstatement of steel global level production after a decrease due to the pandemic, and also the price rise of coal in Western Europe.

In the long term, coal prices will be determined, on the one hand, by a global decline in demand, and on the other, by the average cost of coal production in the main supplying countries. Over time, the second one will most likely tend to increase due to inflation and exhaustion of coal reserves with low production costs.

Unlike China, which is currently able to generally cover its coal needs, such large electricity consumers as Japan, India, and EU countries have to import it, the agency notes. Experts predict that, despite the active policy of European countries to introduce alternative energy sources, it will be difficult for these countries to abandon coal in the future 5 – 10 years.

Coal loading has also increased. In addition, the weather has improved: in winter, there was not always enough snow removal equipment on the roads where coal was exported. In March, the railway workers also found ways to improve the straight-through technologies of servicing coal miners, adding locomotives for removal from non-usable routes.

Firstly, it should be noted the increase in coal loading from Kuzbass – the centre of Russian coal mining. This happened after the government paid special attention to the development of railway infrastructure to increase the export supply of coal from the Kemerovo region. As a result, in March, the maximum dynamics of coal loading for all the previous months of 2021 was noted.

The Ministry of Coal Industry of the Kemerovo region has not yet provided official data on production in March, but, according to Russian Railways, the loading of coal at the stations of the Kemerovo region in March increased by 8%, 19 million t. According to the company’s 1Q21 results, the shipment of fuel from coal loading stations in the region amounted to 53.2 million t, which is 4.1% higher than last year. Every day, on average, more than 8.3 thousand cars with coal were sent from the stations of the region.

The largest volumes of coal supplies in 1Q21 in Kuzbass were carried out by the Kuzbass Fuel Company (KTK), a member of the SAFMAR M. Gutseriev group.

At the same time, the supply of thermal coal for export increased in 1Q21 compared to the same period in 2020 by 33% – from 1.74 to 2.32 million t of fuel.

KTK increased sales of thermal coal by 32% compared to the same period in 2020. The volume of sales of thermal coal in 1Q21 amounted to 3.3 million t, while in 1Q20 it was 2.5 million t.

Sales of solid fuel to the domestic market in 1Q21 increased by 29% compared to 1Q20 – from 0.76 million t to 0.98 million t of coal.

It is also necessary to note Russian Coal, a part of the same SAFMAR group, which, according to the results of 1Q21, shipped 3.9 million t of coal and brown thermal coal to consumers. This is 18% higher than the shipment figures for 1Q20, which amounted to 3.3 million t of fuel.

The impetus for the growth of production and transportation was given by the attention of the country's leadership to the coal industry throughout the first quarter and, in particular, the meeting on the development of the coal industry, held on 2 March 2021, where Russian President Vladimir Putin paid special attention to the export potential of Kuzbass.

“Clear guidelines have been set: the Eastern Polygon should be developed, the BAM and the Trans-Siberian Railway should be built. By 2024, it is planned to increase the export of Kuzbass coal in the eastern direction by at least 30% compared to 2020. Thus, already in 2022, 58 million t of coal will be sent to the east, and in 2024, 68 million t. At the same time, for the last 4 years, we have been standing on the same figure – 53 million t of coal. Increasing capacity is an important strategic decision that will allow developing the industry and planning investments,” commented Kuzbass Governor, Sergei Tsivilev, on the current state of affairs at the 900 Days press conference: A new stage of development, 7 April 2021.

In 2025, the export of Russian coal in this direction can reach 57.5 million t against 24.1 million t at the end of last year.

Russian coal miners in the coming years will actively increase exports of products at the expense of the Asia-Pacific region. By 2025, according to forecasts of the Ministry of Energy, supplies to ATP will increase to 174 million t – this is 42% more than was exported in 2020.

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