As the global coal market's bull run continues to tear up new ground, domestic suppliers are plotting to jack up exports and grab their share of new international business.
Coal importers, however, say that although Russians are welcome under certain conditions, exports may ground to a halt if power monopolists slap quotas to ensure timely supplies next winter.
"There is no better time to get into the coal market," said McCloskey's Coal Report managing editor Gerard McCloskey at an international coal conference in Moscow this week.
"If you want to know where the coal is going, look at the States," McCloskey said. "For the balance of the year, no one expects the U.S. market to calm."
Coal prices follow the oil price dynamics with a six- to eight-month lag.
So when oil tested a high of $35 per barrel last year, coal producers began to put new price tags on their supplies.
The appetite for the solid fuel is not coming down because higher oil and gas prices have forced U.S. utilities to move back toward coal for their dual-fired coal/oil plants, analysts say.
Local exporters are salivating at the prospect of selling higher quantities of coal abroad.
"Two thousand was a breakthrough year for Russia's coal exports," says Alexei Kharitonov, manager for Eastern Europe and CIS with Krutrade, a trading arm for Kemerovo-based Kuzbassrazrezugol, which makes up 14 percent of Russia's annual coal output.
Krutrade increased exports 67 percent to 12.5 million tons in 2000. Next year, the company plans to raise exports 28 percent to 16 million tons.
"Within 1.5 years, the reputation of Russian coal will improve drastically," Kharitonov said.
Russian coal has had a nasty reputation over the years, but when the bulk of the industry went into private hands, the landscape began to change.
"The quality has been erratic over the years, although it has improved recently," said Aage Faurholt, vice president of Energie E2, which has been bringing Russian coal to Finland for half a century.
A photo Energie E2 displayed at the conference showed a heap of scrap metal, from slabs to oxidized wires, that was extracted from one of the wagons of Russian coal entering Finland.
"We got used to this," said Faurholt. "We know that to use Russian coal, we need to put three magnets, a special screen and other controlling devices and allow for the breakdown of three or four conveyor belts a year."
One conveyor belt costs about $10,000, but Energie E2 nevertheless is increasing its purchases of local coal this year, company officials said.
Krutrade is not the only company keeping a close look on foreign markets.
Avtobank-owned Prokopievskugol intends to raise exports 200 percent to 6 million tons by 2003, up from 2 million tons in 2001.
Sokolovskaya holding company, which exported a meager 66,230 tons in 1998, delivered 1.9 million tons ?€” or 60 percent of its output ?€” to foreign markets last year and hopes to increase exports to 6.25 million tons by 2005.
"Two factors ?€” diversification and timely payments ?€” make foreign markets attractive," said Krutrade's Kharitonov.
Exporters may have their hopes dashed, however, if national power grid Unified Energy Systems gets its way and protects the domestic market with quotas or export tariffs.
"UES is lobbying to put barriers in the way of coal exports," said Ivan Kartashov, director of Vostsibugolsbyt.
A UES spokesman said Wednesday that quotas were out of the question, but he did not exclude the possibility that export tariffs could be imposed.
"It is our position that administrative restrictions should not be used in a market economy," the spokesman said. "But if there is a lack of fuel in the domestic market, we will push for economic mechanisms to limit foreign supplies."
Last year, power companies bought about 55 percent of Russia's coal output of 246.8 million tons, but that figure is down by about a quarter since year start, according to Vostsibugolsbyt.
Coal Market Research Institute director Alexander Kovalchuk said coal exports should slow down by the middle of the year due to growth in costs, better domestic market conditions and possible administrative restrictions.
"Coal companies are driven by the force of inertia," he said. "They do not have accurate forecasts at their disposal."
Besides, the global coal market has a two- to three-year cycle, so the current bull run may be coming to an end, added Kovalchuk.
International coal trade grew 9.6 percent to 331 million tons last year, according to McCloskey. It is forecasted to increase 6.3 percent in 2001 and 5.7 percent in 2002.
But whether Russia joins in the trade boom remains an open question. "What if the railoads are privatized?" McCloskey said.
Russia was the world's No. 7 coking coal exporter and No. 8 heating coal exporter in 1999, according to the World Coal Institute.
Export volume estimates vary from 20 million tons to 44 million tons for 2000, according to various sources.
Coal importers, however, say that although Russians are welcome under certain conditions, exports may ground to a halt if power monopolists slap quotas to ensure timely supplies next winter.
"There is no better time to get into the coal market," said McCloskey's Coal Report managing editor Gerard McCloskey at an international coal conference in Moscow this week.
"If you want to know where the coal is going, look at the States," McCloskey said. "For the balance of the year, no one expects the U.S. market to calm."
Coal prices follow the oil price dynamics with a six- to eight-month lag.
So when oil tested a high of $35 per barrel last year, coal producers began to put new price tags on their supplies.
The appetite for the solid fuel is not coming down because higher oil and gas prices have forced U.S. utilities to move back toward coal for their dual-fired coal/oil plants, analysts say.
Local exporters are salivating at the prospect of selling higher quantities of coal abroad.
"Two thousand was a breakthrough year for Russia's coal exports," says Alexei Kharitonov, manager for Eastern Europe and CIS with Krutrade, a trading arm for Kemerovo-based Kuzbassrazrezugol, which makes up 14 percent of Russia's annual coal output.
Krutrade increased exports 67 percent to 12.5 million tons in 2000. Next year, the company plans to raise exports 28 percent to 16 million tons.
"Within 1.5 years, the reputation of Russian coal will improve drastically," Kharitonov said.
Russian coal has had a nasty reputation over the years, but when the bulk of the industry went into private hands, the landscape began to change.
"The quality has been erratic over the years, although it has improved recently," said Aage Faurholt, vice president of Energie E2, which has been bringing Russian coal to Finland for half a century.
A photo Energie E2 displayed at the conference showed a heap of scrap metal, from slabs to oxidized wires, that was extracted from one of the wagons of Russian coal entering Finland.
"We got used to this," said Faurholt. "We know that to use Russian coal, we need to put three magnets, a special screen and other controlling devices and allow for the breakdown of three or four conveyor belts a year."
One conveyor belt costs about $10,000, but Energie E2 nevertheless is increasing its purchases of local coal this year, company officials said.
Krutrade is not the only company keeping a close look on foreign markets.
Avtobank-owned Prokopievskugol intends to raise exports 200 percent to 6 million tons by 2003, up from 2 million tons in 2001.
Sokolovskaya holding company, which exported a meager 66,230 tons in 1998, delivered 1.9 million tons ?€” or 60 percent of its output ?€” to foreign markets last year and hopes to increase exports to 6.25 million tons by 2005.
"Two factors ?€” diversification and timely payments ?€” make foreign markets attractive," said Krutrade's Kharitonov.
Exporters may have their hopes dashed, however, if national power grid Unified Energy Systems gets its way and protects the domestic market with quotas or export tariffs.
"UES is lobbying to put barriers in the way of coal exports," said Ivan Kartashov, director of Vostsibugolsbyt.
A UES spokesman said Wednesday that quotas were out of the question, but he did not exclude the possibility that export tariffs could be imposed.
"It is our position that administrative restrictions should not be used in a market economy," the spokesman said. "But if there is a lack of fuel in the domestic market, we will push for economic mechanisms to limit foreign supplies."
Last year, power companies bought about 55 percent of Russia's coal output of 246.8 million tons, but that figure is down by about a quarter since year start, according to Vostsibugolsbyt.
Coal Market Research Institute director Alexander Kovalchuk said coal exports should slow down by the middle of the year due to growth in costs, better domestic market conditions and possible administrative restrictions.
"Coal companies are driven by the force of inertia," he said. "They do not have accurate forecasts at their disposal."
Besides, the global coal market has a two- to three-year cycle, so the current bull run may be coming to an end, added Kovalchuk.
International coal trade grew 9.6 percent to 331 million tons last year, according to McCloskey. It is forecasted to increase 6.3 percent in 2001 and 5.7 percent in 2002.
But whether Russia joins in the trade boom remains an open question. "What if the railoads are privatized?" McCloskey said.
Russia was the world's No. 7 coking coal exporter and No. 8 heating coal exporter in 1999, according to the World Coal Institute.
Export volume estimates vary from 20 million tons to 44 million tons for 2000, according to various sources.