Russian coal squeeze out competitors in Mediterranean

Russian thermal coal exports to the Mediterranean region rose by 3pc on the year to 23.66mn t in 2019.

This reflects lower competition from other origins as European prices decreased, but with a sharp decline of coal consumption by the major importers in the region, supplies of Russian coal are likely to fall in 2020 from last year, market participants said.

Russia was Morocco's largest supplier in 2019, overtaking the US. Moroccan thermal coal imports from Russia rose by 46pc on the year to 4.39mn t amid increased demand from utilities, Global Trade Tracker data show. Morocco's total thermal coal imports were up by 12pc on the year to 7.72mn t.

Turkey, the biggest buyer of Russian coal in the Mediterranean region, increased its imports from Russia to 12.35mn last year from 11.17mn t in 2018. Russia remained the second-largest thermal coal exporter to Turkey, with a slightly increased share in total supply. But Colombian and US suppliers had to reduce their activity in the region and switched to sales on alternative routes.

Some new demand could come from Egypt, which has traditionally focused on US origin, as Egypt is the only country in the Mediterranean basin that permits high-sulphur coal imports. The recent downside in global coal markets has pushed fob Russian and Colombian prices to multiple-year lows, making them more competitive with other origins. And Russia's geographical proximity to Egypt adds to the advantages of its share in the market.

Russian coal has gained market share since February despite an overall drop in Egypt's total imports. This was mostly as the delivered costs for coal cargoes out of Baltic ports opened a wide discount to Illinois basin coal with less than 3pc sulphur content, which has dominated the Egyptian market in recent years.

But Egypt imported 220,000t of Russian coal last year compared with 568,000t in 2018. Total imports to the country also fell to 3.41mn t from 5.75mn t a year before.

Italy and Spain reduced receipts from all sources including Russia last year. Spain imported 1.73mn t of Russian coal, down from 3mn t in 2018. And imports of Russian origin to Italy dropped by 17pc on the year to 4.05mn t.

Find more news, price information and market analysis on Russian coal exports in Argus Russian Coal report.