Vostochny coal premium to S Africa, Colombia widens

The premium held by the high calorific-value (CV) Russian fob Vostochny price to equivalent South African and Colombian values has widened sharply in recent weeks, making product from the non-Russian origins more attractive to buyers in Asia.

The Argus-assessed NAR 6,000 kcal/kg fob Vostochny price moved to a premium to the NAR 6,000 kcal/kg fob Richards Bay price on 24 April, and the spread has since widened to $17.28/t on 12 May from $2.00/t.

The NAR 6,000 kcal/kg fob Vostnochy price has fallen consecutively over the past four weeks, but at a softer pace to that of other origins. The Russian price was assessed at $124.28/t on 12 May, down from $130.20/t on 21 April, a drop of 5pc. Meanwhile, the NAR 6,000 kcal/kg fob Richards Bay price fell to $107/t on 12 May from $132.20/t on 21 April, a drop of 19pc.

And the NAR 6,000 kcal/kg fob Vostochny price has been at a premium to the Argus assessed NAR 6,000 kcal/kg fob Puerto Bolivar price for past 10 weeks, opening an arbitrage window for Colombian coal to China. The premium has averaged $5.95/t over 3 March to 12 May, hitting a high point of $13.53/t on 12 May.

A Swiss trading firm has started shifting Colombian cargoes away from Europe towards China, sources said.

Meanwhile, South African exports to China, South Korea, Japan and Taiwan have risen sharply in recent months, spurred by the convergence in Russian and South African prices.

South Korea's main thermal coal buyers have noted that Russian coal's freight-adjusted discount to the most competitive alternative needs to be greater than $15-20/t to justify the geopolitical risk of buying Russian product, a factor that has seen imports from the origin increasingly displaced as global price benchmarks continue to converge.

Russian exports could fall in May

Seaborne exports of thermal coal from Russian ports could fall on the year in May owing in part to the eroding competitiveness of far east Russian coal.

From 1-16 May, Russian ports exported 7.2mn t of thermal coal, down from 8.4mn t during the same period in 2022. If this pace is maintained for the rest of this month, exports would hit 13.5mn t, down by about 17pc from exports in May 2022, according to provisional shipping data. This vessel data will not include overland flows to nearby countries such as China, but may include Kazakh-origin coal leaving Russian ports.

However, if Russian exports reach 13.5mn t this month, then exports for the first five months of 2023 will set a record high of 68.9mn t, up from 61.8mn t in 2022 and 62.1mn t in 2020.

It is too early to get a full picture of export destinations this month, but the largest export destinations based on confirmed shipments are China, South Korea, Turkey and Taiwan.

Russian customs data show a total 47.4mn t of thermal coal was exported in the first quarter of 2023, up by 14pc on the year.

By Evan Millard

Exports through Russian ports by origin $/t

Exports through Russian ports $/t

NAR 6,000 kcal/kg prices $/t

NAR 6,000 kcal/kg Russian price discounts $/t