Russian integrated steel producer and mining company Mechel continues to drive up its export sales of coking coal, amid an increasingly challenging cost environment for steel output.
Mechel has signed a term contract with trading firm Steel Mont to supply up to 350,000t of coking coal produced by its subsidiary Moscow Coke and Gas Plant and 350,000t of pulverised coal injection (PCI) grade coal and anthracite from another subsidiary, Southern Kuzbass Coal. This follows on from the renewal of its annual coking coal contract with Chinese state-owned steel producer Baosteel Resources for 700,000t of coking coal from September 2019 to August 2020. It also signed a deal with Chinese steel producer Jiangsu Sha to supply up to 720,000t of coking coal produced by its subsidiary Yakutugol for the same period. Both deals were signed earlier this month.
The volumes contracted to Mechel will be shipped by sea via Port Mechel-Temryuk in the Krasnodar region, as well as Russian ports in the North and Baltic seas.
"We expect the demand for metallurgical coals and coke to remain stable despite global commodity market volatility," said Mechel's deputy chief executive Pavel Shtark.
Mechel is not alone in its plans to increase its share of the seaborne coking coal market, despite the obstacles from steel producers in Europe cutting back production and Asia-Pacific prices feeling the strain of Chinese import quotas and Indian buyers taking time to return after the monsoon season. The Argus assessed low-volatile fob Australia coking coal price fell to $146.50/t yesterday, the lowest level since June 2017. The low-volatile cfr north China coking coal price fell to $166.80/t, the lowest since July 2017.
Russia expects to continue increasing coking coal output by 45.4pc from 101.1mn t last year to 147mn t by 2035, based on its energy ministry's draft programme for the development of the coal industry. Production growth is expected to be driven by increased exports, mainly to Asia-Pacific, said the document that is still pending approval by the government.
Southern Kuzbass Coal launched a new longwall earlier this month at the Lenina underground mine, in line with Mechel's long-term strategy of increasing output and exports. The new longwall has estimated coking coal reserves of 560,000t and is expected to produce 70,000-80,000 t/month, for sale to both domestic and overseas steel producers. The company's second-quarter coking coal production rose by 13pc from a year earlier to 1.9mn t, while PCI production rose by 9pc to 284,000t. Both were supported by higher sales domestically and to Asian markets.
