Russia Coal: Asia Export Drive
BMI View: With coal being the second-largest cargo handled in Russian ports, the outlook in the country's coal industry will continue to have profound implications on port development plans in the shipping space. We expect the bulk of investment in coal-related logistics projects to concentrate on the east over the coming years as coal shipments from Russia are increasingly reorientated towards key consumers in Asia.
Following our previous discussion on the key forces that are shaping the growth of Russia's coal mining industry ( see 'Russia Coal: Towards Coking & The East', November 27, 2013), we have delved deeper into how continued growth in the coal sector will fuel developments in the country's port and freight transport space. We believe the push for greater tonnage onto the seaborne market will encourage more companies, predominately mining firms, to undertake transport projects in Russia. The bulk of these projects will concentrate on enhancing coal supply chains and directing greater volumes of coal towards Asia, a region which Russia is betting on for resilient growth in coal consumption.
Russia's coal mining sector is set to undergo a period of modest expansion over the coming years. Admittedly, President Vladimir Putin is spending around US$123bn to develop the coal industry between 2012 and 2030. However, growth in Russia's coal production is unlikely to be stellar by any measure as a pipeline of obsolete mining operations will be retired over the same period. In contrast to the government's expectation for coal output to increase at an annual clip of 1.7%, we forecast Russia's coal production to increase at an annual average rate of 2.7% between 2013 and 2017. We believe efforts to rein in production may encounter resistance from private investors, while the delays associated with the construction of new projects may force the government to tone down its rhetoric against the closure of obsolete mines.
|Still Coal-Hungry In Asia|
|Global - Coal Imports (mnt)|