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China Squeezes SCEC Out of Europe
The Siberian Coal Energy Co. has become the first Russian producer of energy coal to make supplies to the United States. Company managers say that the have entered the new market due to unfavorable market conditions in Europe. SCEC has just dispatched a shipment of 100,000 tons of coal to the U.S. port of Baltimore. The company refused to name the purchaser for the order, but said that the coal was intended for energy generation and not for metallurgy. SCEC is one of the world’s ten largest coal producers and the third largest in Russia. It also owns blocking packages in a number of electric companies. It is controlled by Andrey Melnichenko and Sergey Popov through the offshore Donalink Ltd. Right now, more than half the company’s exports go to Europe. The price of coal delivered to Europe has fallen from $74 per ton to $54-58. The price fall is attributed to China’s increased coal exports at dumping prices. According to information received by Kommersant, the cost of coal production is $13 per ton, transportation by train to a seaport costs $30 and freight costs another $15. Thus exports to Europe are unprofitable.
At SCEC, they say that the American market is attractive even when transportation costs are taken into account and that the company is seriously considering that market as an alternative to Europe. “But until the results of the firing of the test load are in, it’s too early to talk about volume,” a company official said. Publicly accessible sources indicate that the coal market in America is even worse than in Europe. A short ton (about 900 kg.) of coal sells for an average of $40, without accounting for delivery costs. Contractual conditions may affect the price as well. However, Aton analyst Dmitry Skryabin says that the American market holds promise. Natural gas prices are much higher than those for coal, which will drive coal prices up as demand for to increases. The fact that the U.S. is not a signatory to the Kyoto Protocol also bodes well for the U.S. coal market. An executive at another coal company noted that “SCEC has an excess of coal that it has to get rid of somewhere. Entering a new market will allow the company to hedge against risks from the unstable price situation in Europe.” At Kuzbassrazrezugol, another large Russian exporter, they do not intend to follow SCEC’s example, however. “The company is limited in its sales policies by long-term agreements,” company vice president Mikhail Chernik noted.
www.kommersant.com
All the Article in Russian as of Nov. 03, 2005
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