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Russia's Suek AG declares force majeure after Vanino port fire: letter

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Russia's Suek AG declares force majeure after Vanino port fire: letter

Highlights

Company yet to detail period of suspended operation

Port shipped 23.2 million mt cargo in 2020

Development seen aggravating China's power crisis

Russian coal producer and exporter Suek AG declared force majeure indefinitely following a fire at the Vanino Bulk Terminal on Oct. 11, according to a customer letter seen by S&P Global Platts Oct. 13.

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On Oct. 11, a couple of conveyor belts were damaged by the fire, making it impossible to load vessels at the port, the letter sent by the company to its clients read.

As per the letter, the company is still assessing the damage caused by the fire and will soon release an update on how long the operations will remain suspended.

An email sent to the company did not elicit any response till the time of publication.

Built in 2008 for shipping to China, South Korea, Japan and Taiwan, the Vanino port shipped 23.2 million mt of dry bulk cargo in 2020, according to Suek's website. The company produced 67.7 million mt of anthracite and 33.5 million mt of lignite in 2020.

Sources in the shipping industry expect minimal disruption to market fundamentals as a result of the force majeure.

A ship-operator source pointed out that there was another terminal at Vanino port which could load thermal coal from other miners.

"There are other ports nearby to which some volumes could be diverted," a shipbroker source said. "In the short term, it could also mean there has to be more replacement volume from Indonesia," the source added.

A total of 9 vessels are expected to reach Vanino port before Oct. 17, according to Platts cFlow trade-flow analytics software.

The FOB Russia price for 6,300 kcal/kg GAR coal was assessed at $195/mt on Oct. 8, up $25/mt on the week and jumping 119.1% since Jan. 8, according to Platts data.

Market participants expect the price of Russian coal to shoot up, given that demand is firm and global coal supply continues to tighten.

On Oct. 7, Richards Bay Coal Terminal in South Africa caught fire, though the impact of the fire remains unclear.

Furthermore, Chinese province of Shanxi faced heavy rains and flooding which resulted in 60 mines being shut. Shanxi is a major coal producing region for China.

Market participants said that the fire at the Russian port may aggravate the power crisis in China as it relies on Russian coal to meet its requirements.

China started rationing power to industries and in some cases to residential areas because of coal shortage and to meet emission targets.