SUEK made its way to China by train

While the creation of a joint venture between Gazprom and SUEK was stuck at the stage of discussion between the parties to the deal and its terms, the coal company took an important step in its business. SUEK yesterday announced the shipment of the first trial batch of coal to China by rail. At the same time, the company reached an agreement with its client, the state corporation China Datang Corp. on the start of long-term supplies of coal to China by rail through the Zabaikalsk-Manchuria transit point. Until now, SUEK exported fuel to China only through the port of Vostochny, which significantly increased the cost of raw materials.

As stated in a press release from SUEK, yesterday the first test batch of fuel in the amount of 1 thousand tons was sent from the Tugnuisky open-pit mine in Buryatia. The company explained that in total about 500 thousand tons of coal will be sent along this route during the year. “This is not a very large volume, but in the future, we hope, supplies will increase at a significant pace,” said a SUEK representative. “Moreover, China Datang is one of the largest energy companies in China.” True, the company has not yet disclosed the price of the issue, as well as the duration of the contracts, citing commercial secrets.

The Chinese fuel and energy market is considered one of the most promising and rapidly developing in the world. Commenting on plans to create a joint venture with Gazprom, one of the top managers of SUEK, in a conversation with a Vremya Novostey correspondent, said that he is not afraid that the coal company will turn from an independent business into a “raw materials appendage” of the gas monopolist, or rather, of its projects in electric power industry. The newspaper's interlocutor saw the prospects for business development precisely in the needs of the Chinese market, assuring that SUEK would be able to produce as much coal as it could sell.

However, SUEK has been trying to gain a foothold in the Chinese market for a long time. Until now, the company has been able to achieve only small short-term contracts, in which the total shipment volume was below 500 thousand tons, which is approximately 1.5% of SUEK's total exports. This is explained both by the closedness of the market itself, where each transaction requires serious approvals (negotiations with China Datang Corp. lasted for about a year), and by the lack of free transport capacity. Currently, the loading capacity of the Vostochny port is about 10 million tons. SUEK used its existing capabilities mainly for shipping coal to Japan and Korea. The new route will significantly increase the volume of supplies in the Chinese direction. In addition, the company is now working on the construction of its own shipping terminal in the Khabarovsk region with a capacity of 12 million tons of raw materials.

The company emphasizes that deliveries by rail are more competitive, as they can significantly reduce the cost of rail transportation both in Russia and in the interior regions of China, as well as actually eliminate freight costs. “The implementation of this project opens up the northeastern market of China for us, and also allows us to strengthen our position in the south of the country. The Chinese side also receives additional benefits by reducing taxes on coal imports,” says Alexey Popov, head of the SUEK AG branch in Taipei, commenting on the start of coal transportation to China by rail.

In addition, as a company representative said, SUEK is now negotiating with other Chinese energy companies. So, if the logistics of the new route are successful, it will be used for new contracts.

Anna GORSHKOVA, Ivan GORDEEV