Russia’s energy industry has been in the spotlight lately. Political tension aside, Russia’s Energy Minister recently announced that there will be long-term growth for the capacity of coal terminals in Russian seaports. What does this mean for Russia and its Asia-Pacific coal and shipping counterparts? We caught up with Georgi Slavov, Head of Basic Resources Research Group at Marex Spectron to find out his view on the situation.
Russia’s Energy Minister recently announced that the capacity of coal terminals in Russian seaports will grow 2.5 times to 190-230 mln t by 2030. What are we anticipating to change for the Asia-Pacific coal and shipping industries in the next 5 years?
Georgi: Projected export capacity is not the same as export availability but the plan reveals commitment to grow the market share on both European and Asian markets. If implemented and executed correctly, the strategy to expand port capacity ahead of mining and railway capacity is a sign of prudent economic policy. Coal is the fuel of choice in Asia and Russia is well positioned to take advantage of the constantly rising demand in the region.
How will these changes affect the Russian coal producers and exporters?
Georgi: The producers/exporters of coal will benefit if they are competitive on the global market. Due to various constrains (harsh weather conditions, distances for inland transportation etc.) the Russian producers are relatively expensive when compared on a free-on-board (FOB) basis with other exporters around the world. However, the favourable geographical location of the key Russian export ports, combined with a rising freight market in the last 6-8 months worked in their favour. The freight market is off its cyclical trough which in our view will continue to support the exports from Russia.
Marex Spectron plans to start gas and power research this year. What is the drive behind this project? How will the findings of this research help us to better analyse the changes in the demand for Russia’s resources?
Georgi: Marex Spectron business model is different from the traditional commodity broker. High quality fundamental trading and investment research combined with impeccable execution capabilities are all part of our unique client offering. Whatever the market we are looking at, we aim to bring a new perspective to clients that’s based off our ability to see the markets more clearly than others due to our position as a broker.
You will be presenting at the 9th annual Russian & CIS Coal Summit this May in Moscow. What is the main message that you would like to share with the stakeholders at the summit? Is there any other topics that you are looking forward to hear?
Georgi: The key message in my presentation is that any producer who would like to compete on the international seaborne market for coal will need to increase the level of sophistication in their trading operations. Leaving the “comfort zone“ of the domestic market means that the seller will face the volatility of the global coal, freight and money markets. As mentioned above, selling on an FOB basis will most likely not deliver the desired results due to relatively high cost of extraction and inland transportation. Therefore, many exporters will find that greater involvement in shipping is required. Building in-house shipping department, market research and employing hedging techniques to mitigate the risk from freight, currency and international coal markets volatility are all part of the prudent export strategy. Events like Russian & CIS Coal Summit provide just that.
To find out more about summit program and to register, please visit the Russian & CIS Coal Summit website.
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