Supplies of coking coal from Russia to Ukraine are decided mainly according to the residual principle and the Ukrainian steelmakers receive low-quality raw material leading to a decrease in production profitability, said Anatoly Starovoyt, general director of the Ukrainian coke association UkrKoks.
Russia is the main exporter of high quality coking coal to Ukraine, with imports from Russia amounting in 2009 to 69-77 percent of Ukraine's overall imports of coking coal. However, according to the Ukrainian association of metal producers Metallurgprom, since the beginning of this year imports of coking coal from Russia have started to decrease, while the imported coal is of lower quality. Thus, while in Q4 2009 Russian coking coal accounted for 77 percent of Ukraine's total imports, in Q1 2010 the level was 59 percent. The decrease of Russia's exports of coking coal to Ukraine is mainly due to the increase of domestic consumption, as well as due to the opportunity to supply coal to Asian markets, mainly China, at higher prices compared with the Ukrainian market.
"The lack of high quality coking coal with low sulfur content has always been a problem in Ukraine. But in recent years it has increased since Russia's main coal producers have joined metallurgical holdings. Russian domestic consumption of the most valuable grades of coal has increased significantly. The acuteness of the deficit is being reduced by imports of coking coal from Kazakhstan, but it does not solve the problem." Metinvest's director of coal and coke division Vladimir Gusak said in an interview given to Kommersant-Ukraine newspaper.
According to the Concorde Capital investment company, an optimal way of supplying the Ukrainian steel industry with high-quality coking coal in the future is via import by sea from overseas, mainly from the United States, and possibly from Australia and Canada; however, so far, the country has a lack of port facilities for handling coal.
In Q1 2010, Ukraine imported 2.2 million mt of coking coal - up 39 percent year on year, and purchased 4.9 million mt of coking coal from domestic companies - up ten percent year on year.
Ukraine's coke production and coking coal consumption, million mt (UkrKoks)
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