Kazakhstan has increased its exports of coal through Russia to Europe by 11% in 2022, replacing Russian coal in the EU market. The shipment of Kazakh coal through the ports of Latvia has increased significantly, with Ventspils and Riga demonstrating the highest growth dynamics. The EU countries increased coal imports from Kazakhstan to 4.9 million tons, up from 780 thousand tons in the same period of 2021. Meanwhile, Russian coal companies are redirecting their supplies to Asia. The largest coal producers in Kazakhstan, Bogatyr Komir and Shubarkol Komir, make up more than 50% of the coal export market. However, further export growth may be challenging due to the declining prices of thermal coal in Europe.
The sanctions against Russia became a “serious shock to the transit industry” in the Baltic States. Still, the Kazakh coal transit is expected to increase in the first quarter of 2023, thanks to discounts on rail transit through Russia. The head of Estonia’s Operail, Raul Toomsalu, believes that Kazakhstan has a significant economic interest in transporting its goods through the Baltic Corridor and Finland.
According to Boris Krasnozhenov from Alfa Bank, Kazakhstan replaces 20% of the volumes previously supplied to the EU by Russia, and further growth will require the development of enrichment facilities and improving the quality of Kazakh coal. While the shipments of Kazakh coal through the Baltic ports have increased, the prices of thermal coal with a caloric content of 6000,130 kcal on the basis of CIF ARA in Europe have decreased to $ 380 per ton, compared with a price of $ 400-2022 per ton in September. Analysts suggest that, at the current level of prices and the volume of investments, there are certain restrictions on further replacement of Russian volumes with Kazakh coal in the European market.
Although the export growth of Kazakh coal through Russia may be challenging, the discounts on rail transit through Russia may lead to increased shipments from Kazakhstan to the Baltic States and Poland. The development of enrichment facilities and improving the quality of Kazakh coal are critical to achieving further export growth.