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Russian coal miners eye greater share in Indian market

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Russian coal miners eye greater share in Indian market

Russian coal shipments to India could grow to as much as 28 million tonnes by 2025 from about 4.5 Mt in 2018, said Sergey Tyrtsev, the first deputy minister for the development of the Far East and Arctic, during a meeting with Indian coal industry representatives, according to Interfax.

India needs 70 Mt of metallurgical coal per annum and is interested in importing it from Russia, the Indian minister for petroleum, natural gas and steel, Dharmendra Pradhan, said at the bilateral coal projects event at Vladivostok in Russia's Far East. India is also open to discussing and implementing major investment projects, including in thermal coal, Pradhan added.

India imported 227.4 Mt of coal in 2018, but of that, only about 4.3 Mt came from Russia, according to data from the World Bureau of Metal Statistics. South Korea, China and Japan were the top three destinations for Russian coal, importing 25.6 Mt, 22.5 Mt and 18.1 Mt, respectively.

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Northern Sea Route

While the Kuznetsk Basin in southwestern Siberia is Russia's top coal-mining region, projects are also emerging in the north and east of the country, particularly as shipping year-round via the Northern Sea Route becomes a possibility, enhancing trade links with Asia.

The Russian coal industry's key investment projects are consolidating in the Far East, according to Dmitry Kasatkin, deputy head of the Socio-Economic Research Center at Moscow-based think tank Center for Strategic Research.

A lack of rail infrastructure and President Vladimir Putin's target of increasing shipping via the Northern Sea Route to 80 Mt per year by 2024 are the main drivers behind companies' export strategies, Kasatkin told S&P Global Market Intelligence.

India is one of the key target markets for Russian coal producers, according to Kasatkin. The Center for Strategic Research forecasts a compound annual growth rate of 6% for Indian coking coal consumption from 2018 to 2028 and 4% for imports thereof over the same period.

Restrictions on a variety of Russian exports to Ukraine from June 1, including coking coal, have driven coal producers to seek out new markets. Russian coking coal exports to Ukraine fell to almost nothing in June when a permitting system administered by the Ministry of Economic Development came into force.

Trial shipments of coal test samples to India have already taken place, the managing director of the investment department of the Far East Investment and Export Agency, Alexander Volkov, said at the meeting in Vladivostok, according to Interfax.

Russian and Indian companies have progressed from statements of intent to actual work on projects, according to Volkov.

There are six coal projects worth a total of US$1.8 billion underway in the Far Eastern Federal District at the moment, according to Tyrtsev. To the west, in the Far North of the Siberian Federal District, several other major mining projects are also under development, including those of Vostok Coal on the anthracite-rich Taymyr Peninsula.

Vostok Coal belongs to Russian businessman Dmitry Bosov, who also owns Russia's largest metallurgical coal producer and top supplier to India, JSC Siberian Anthracite. The company produced 24.1 Mt of coal and anthracite in 2018 and shipped 23.7 Mt of metallurgical coal. Siberian Anthracite plans to more than double production to 58 Mt by 2022.

The company plans to produce and ship up to 19 million tons of coal via the Northern Sea Route in 2024 with help from nuclear-powered icebreakers in winter, The Barents Observer reported.

Another company, Severnaya Zvezda, which means North Star, is also looking to exploit the Taymyr Peninsula's coking coal reserves with the development of the Syradasai deposit, 120 kilometers south of the town of Dikson on the Kara Sea, Interfax reported. The company plans to start production at 3 Mt in the first phase, rising to 10 Mt in later stages.

Taymyr's coal will be shipped from two new terminals near Dikson — Chaika and Severny — despite their proximity to a national park, the boundaries of which were altered by the federal government to accommodate the seaports.