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Kazakhstan preps draft order on coal export ban for six months to secure supplies

Highlights

Planning coal export ban via road

Currently the order is under discussion

Kazakhstan was seen as potential supplier to Europe

Kazakhstan has prepared a draft order to ban coal exports via road for the next six months, as part of its efforts to secure domestic supplies and cater to local power needs, the Ministry of Industry and Infrastructural Development told S&P Global Commodity Insights Aug. 4.

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The draft order -- reviewed by S&P Global and which is currently under public consultation -- comes at a time when global markets, especially Europe, is scrambling to maintain coal supply security amid elevated prices as a result of the Russia-Ukraine war.

Kazakhstan, for some time, was being seen as a prospective supplier to Europe due to its rich coal reserves in absence of Russian coal due to the sanctions imposed by the former.

According to the draft order, Kazakhstan needs to inform the Eurasian Economic Commission about the introduction of the ban.

"In according with the Articles 47 and 29 of the Treaty on the Eurasian Economic Union the parties have the right to introduce temporary trade measures," the Eurasian Economic Commission told S&P Global earlier this week.

S&P Global recently reported that Kazakhstan was among the new origins (along with Tanzania and Nigeria) being considered as a further backup by many European coal buyers. Along with the US and South Africa, the more prominent substitute supply sources are being explored in Colombia, Australia and Indonesia.

Europe assessing impact

With the flow of Russian coal to Europe coming to an end, buyers jostling for alternatives are increasingly in favor of tapping non-traditional markets.

The high-ash content in most of the coal found in Kazakhstan limits its ability to penetrate export markets in the European Union. However, "an exception to this general situation is the Shubarkol Basin, where coals have much lower ash and sulfur levels (5-15% and 0.5%, respectively) and a higher heating value (5,600 kcal/kg)," the 2021 national energy report published by the Kazakhstan Association of Oil & Gas and Energy Sector Organizations (Kazenergy) said.

Kazakhstan produced 109.2 million mt coal in 2020, of which 10.1 million mt was coking coal. It exported 22.4 million mt coal in the year, of which 22.1 million mt were supplied to nations from the former Soviet republic, according to the Kazenergy report.

"High transportation costs, due to long distances between production sites and consumers, render Kazakhstan's coal relatively expensive for consumers and reduce its competitiveness even in the Russian market," the International Energy Agency pointed out in a 2021 report.

The price of Australian 5,500 kcal/kg NAR low-ash coal increased to $209.85/mt Aug. 4 from $163.4/mt FOB Feb. 24 when the Russia-Ukraine conflict started, S&P Global data showed.

The FOB price of Baltimore 6,900 kcal/kg NAR with 3% sulfur US coal increased from $140.2/mt to $268/mt during the same period. At the same time, the price of higher-grade Russian 6,300 kcal/kg GAR coal fell to $158/mt FOB from $200/mt between Feb. 25 and July 29.