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Russian iron ore exports to China via Trans-Baikal railway surge 62% in 2019

Russian iron ore exports to China via the Trans-Baikal railway shot up 62% to 1.7 million tonnes in 2019, state-owned JSC Russian Railways' Trans-Baikal subsidiary, known as ZabZD, reported Jan. 14.

PJSC Norilsk Nickel Co.'s recently commissioned, polymetallic Bystrinskoye mine in the southeast of Zabaykalsky Krai drove the rise, with leading iron ore producer and steelmaker OAO Metalloinvest also contributing. The share of Metalloinvest's iron ore exports to China grew to 27% from 4%, according to Dmitry Kasatkin, deputy head of the Socio-Economic Research Center of the Center for Strategic Research in Moscow, citing Federal Customs Service data.

Iron ore output from the Bystrinskoye joint venture rose sixfold year over year to 833,000 tonnes of concentrate in the first nine months of 2019 after being fully commissioned in September, according to Norilsk's most recent operational results. The mine is expected to produce between 1.5 Mt and 1.7 Mt of iron ore concentrate in 2020 and could be spun off once it reaches full capacity in mid-2020, Norilsk CEO Vladimir Potanin recently said.

Metalloinvest's exports surged 45% over the first three quarters of 2019 as supplies to Asia increased, according to its latest operating figures from November 2019. Shipments of iron ore, pellets, hot-briquetted iron and direct-reduced iron to the region stood at 32% of total shipments in the first nine months of the year, compared to 4% in the same period of 2018, the company said in November 2019.

"China is needing to import more coal and iron ore from countries like Russia due to stricter environmental regulations for Chinese mills," S&P Global Market Intelligence Mine Economics Analyst Oliver Woolard explained. "These regulations require steel mills to use higher-grade iron ore and coal, which China cannot supply readily domestically."

Overall trade between the two countries along the route through southeastern Siberia rose 4.7% in 2019 to 17.8 Mt of cargo, with exports to China growing by 1.9% to over 15.8 Mt.

Exports of coal jumped 23% to 4.8 Mt via the line, which passes through Zabaykalsky Krai and Amur Oblast, while those of mineral fertilizers shrank 24% to 809,900 tonnes.

Infrastructure upgrades by Russian Railways have increased export traffic along the route, according to Kasatkin.

The northern, western and central areas of China have less developed infrastructure and are less industrialized but are still densely populated, the deputy head said. Russian companies could take advantage of this and continue to grow their share of the Chinese market, Kasatkin concluded.

Overall exports of coal grew 3.6% year over year to 187.4 Mt between January and November of 2019, according to data separately reported Jan. 14, 2020, by the Federal Customs Service.

Russia's coal output could grow to as much as 668 Mt by 2035, according to a draft program for the development of the coal industry up to 2035 that was released by the Ministry of Energy's website at the end of 2019. The release updated a previous version outlining two possible target levels, of 355 Mt and 490 Mt. The conservative scenario of the updated program targets 485 Mt of coal, much of which will be destined for Asian markets such as China and India.