Coal prices in Asia dip to a four-year minimum, primarily attributed to Russian supply.
In the bustling world of energy trade, the cost of Russian coal in Asia has plunged to a four-year low, as reported by "Kommersant." This dramatic drop, according to NEFT Research, is primarily due to an oversupply and reduced imports by key consumers.
Asia has been a significant market for Russian coal, with ports in South China and Western India witnessing a slump in prices to $77.5 and $82.6 per ton, respectively, by May 23rd. These figures represent a 16.8% and 13.1% decline year-to-date, and a staggering 27.1% and 25.5% drop compared to the same period in 2021. Meanwhile, prices in Far Eastern ports have dropped to $63.5 per ton, marking a 30.6% decrease compared to 2024 and a 19.5% fall since the beginning of 2025.
Analysts point out that enough coal stockpiles in China, coupled with a decrease in domestic prices, have pronounced a lasting effect on regional quotes and caused hassles for coal sales. Alexander Titov, a seasoned expert from the Institute of Energy and Finance, shares that China reduced its maritime coal imports by 12% year-on-year, to 127 million tons from January to May this year.
Alexander Kotov, a partner at NEFT Research, revealed that Chinese buyers continue to favor domestic coal due to its cost-effectiveness and increased domestic production. Moreover, high levels of domestic supply are maintained in India, while in Turkey, solid fuel demand is curbed by increased hydropower generation.
Interestingly, the spot price of gas in Asia remains relatively low, around $450 per 1000 cubic meters, according to Boris Krasnozhenov, head of the securities market analysis department at Alfa-Bank. This gas price stability also exerts pressure on energy coal in the region.
The current price level jeopardizes the profitability of energy coal exports, as they no longer become profitable over long distances, as evidenced by the netback for Kuzbass energy coal once again plunging to negative values, minus 271 rubles per ton in Far Eastern ports.
To offset this financial strain within the coal industry, the government has initiated several decisions to support the coal sector under unfavorable market circumstances, such as tax breaks and subsidies to cover part of the transportation costs.
Owing to the decreased interest from key consumers, traders have turned their attention towards smaller markets like South Korea, Vietnam, and Taiwan. South Korea, in particular, has been quite active, with energy companies conducting tenders for coal purchases.
However, internal logistical constraints pose a significant challenge to the Russian coal industry. The rapid increase in railway tariffs for coal and empty hopper cars, which have risen by 103% and 83% respectively since 2021, have contributed to the low netbacks. Additionally, the average cost of coal mining in Western Siberia escalated by 14% from June 2021 onwards, primarily due to the surge in fuel and electricity prices, the key rate, and labor costs.
In essence, the current market dynamics are shaped by a complex interplay of oversupply, decreased imports, competitive pricing, logistical challenges, and strategic government interventions. While Asian markets remain crucial for Russian energy coal exports, traders and buyers operate in a climate of uncertainty, requiring adaptable strategies to navigate these shifting conditions.
The drop in Russian coal prices in Asia, according to NEFT Research, is not only due to an oversupply and reduced imports by key consumers but also because of the cost-effectiveness of domestic coal in key markets like China, India, and Turkey. Meanwhile, analysts point out that the current price level of energy coal jeopardizes the profitability of exports, leading the government to initiate support for the coal sector through tax breaks and subsidies, and traders to seek smaller markets like South Korea, Vietnam, and Taiwan.
