Despite Europe’s strong demand for coal, Russian firms are unable to rapidly expand supply.
This is hindered by infrastructure constraints, the presence of existing contracts, the difficulty to quickly expand output owing to contractor capacity shortages, and coal miners’ desire to sell more to Asia, where the price is greater. However, analysts believe that demand in Europe will be able to take advantage of small businesses who are finding it difficult to ship goods via the Far East, Kommersant writes.
Russian coal firms, according to industry sources, will be unable to rapidly expand supply to Europe in order to capitalize on the favorable market conditions.
Coal demand is increasing as gas prices set new highs nearly every day. According to Bloomberg, European power engineers have asked Russian coal miners to boost coal supply, but the Russian Ministry of Energy has said that it has not received formal requests from EU officials.
According to Eurostat, Russia decreased coal exports to the EU by 10.2 million tons in 2020, to 37.8 million, but remained the biggest supplier, well ahead of the United States (6.6 million tons) and Colombia (6.6 million tons) (5.7 million tons). The EU nations bought a total of 53.6 million tons of coal.
According to the Ministry of Energy, shipments to Europe rose by 2.4 percent in the first half of the year, reaching 22.5 million tons. However, coal miners confront logistical difficulties.
According to a source close to SUEK, the company’s main route passes through the port of Murmansk: “We are ready to load more, but we faced the problem of infrastructural constraints, specifically the non-acceptance of cargo from the Oktyabrskaya railway and, as a result, the compared to previous years during this period.” The port is operating at just two-thirds of its full capacity.
Since the Russian Federation is approaching the heating season, most coal miners simply do not have the chance to redistribute the volumes from previously signed contracts with major Russian power plants and the public sector, according to another market source of Kommersant.
Concerning the potential of expanding output, there has been fierce rivalry for the contractors’ limited capacity.