Coal news and updates

Russian miner Evraz coking coal H1 margins aided by premium grades, exports

Russian miner Evraz said Thursday a greater share of premium grades in the coking coal product mix and exports with lower costs aided improvements in margins over the first half of 2015.

A new premium coking coal mine may be delayed by three months for technical reasons, coming onstream as the market stabilizes, based on company projections.

Evraz's coking coal concentrate production volumes were flat at 6.5 million mt in H1 2015 with overall coal sales at 7.3 million mt, down 14.7% according to an earnings report.

Overall Russian shipments dropped 13% as surplus volumes were reallocated to other Russian clients and to Japan and Korea, driving up non-CIS export sales by 38%. As global output increased from Australia, the market is resuming balance, it said.

We maintain our positive outlook for the domestic coking coal market and expect demand for premium coal grades to remain strong," it said. "While numerous coking coal projects are in the pipeline, they are based on reasonable volume expectations and are unlikely to lead to oversupply. We expect the coking coal market to stabilise in the next six to 12 months and global prices to rise."

The group's consumption declined due to further implementation of pulverised coal injection (PCI) technology at steel mills.

Evraz saw cash costs for coking coal drop to $32/mt in H1 2015, from $55/mt in the year earlier period. Evraz reported EBITDA margin in the coal business of 31.7%, up from 21.9% in H1 2014, due also to the shutdown of unprofitable mines and disposal or shutdown of thermal coal operations.

First half revenue from coal fell 23.7% to $540 million with EBITDA at $171 million, up from $155 million.

"Coal segment EBITDA rose, reflecting the positive effects of the Russian rouble's devaluation on costs, the implementation of the efficiency improvement programme and asset optimization at Yuzhkuzbassugol and the Raspadskaya coal company, which compensated for the decline in coal product sales prices."

The company saw stable demand for coal in Russia while total Russian exports fell by 23% to 8.3 million mt in the half, with weaker demand from China, Ukraine and the EU.

Overall Russian coking coal concentrate production declined by 7% to 23.7 million mt in H1 2015. Domestic consumption remained stable at 19.7 million mt, as local prices rose in rouble terms.

"Despite being affected by global benchmark trends, local prices were supported by the Russian rouble devaluation and stable consumption in Russia.

"In H1 2015, while US dollar-denominated prices declined by 18% compared with H1 2014, rouble-denominated prices increased by 40%."

For new projects Evraz said developing the Mezhegey coal deposit in Tyva, Russia will provide high-quality grades to clients.

Construction of the Mezhegey mine saw complicated hydrogeological conditions slowing work and launch was postponed to December from September.

The expansion of the Sheregesh iron ore mine in Siberia will support a low-cost resource base.

source: http://www.platts.com