Global PCI prices soar, supply chain from Russia disrupted

Wednesday, 07 September 2022 17:07:00 (GMT+3)   |   Istanbul
       

With Russia being the major coking coal supplier globally, any changes in the supplies of coking coal or its substitutes lead to certain developments in the global market (even when demand remains scarce), comprising price amendments by alternative global suppliers and changes in sentiments among market players.

Accordingly, besides the fact that Russian suppliers have continued to find themselves in the crossfire between the difficult search for customers who are ready to accept all potential sanctions-related risks and subsequent difficulties related to insurance, they have started to face serious problems finding appropriate ways to ship their materials. Specifically, a shortage of bearings for the wagons of Russian Railways caused by sanctions has caused serious trouble for the repair of vehicles involved in the transportation of coal. With the shortage of wagons having risen dramatically (while at the beginning of the summer a deficit of wagons was reported amounting to about 1,500 units, by the end of the year it is expected to reach 9,000 units), Russian forwarding companies have been forced to abandon the usage of innovative railcar models. According to estimations, around 100,000 units of components are required in order to restore their operations. However, the departure of the relevant manufacturers from the Russian market due to sanctions, coupled with consequently growing supply chain problems, makes it impossible to achieve this now. “Everyone in Russia has serious supply issues at the loading ports. As a result, there are no fresh offers for coking coal. Moreover, there are no coal gas offers as most of the coal gas goes for thermal use now,” a major international trader commented on the current market developments stating, “I have not heard anything on the withdrawal of offers yet, but supply issues apparently exist,” a representative of an Indian steelmaker echoed these sentiments.

Higher prices in recent deals for ex-Russia pulverized coal injection (PCI) and, concurrently, higher offers from Australian suppliers may be regarded as evidence of the emerging concerns. Accordingly, following a sale of ex-Russia PCI, though to be from Sibuglemet, at $184/mt CFR China, another Russian supplier has instantly raised its PCI prices and even successfully sold at $210/mt CFR China. “This level came as a big shock in China,” a Singapore-based trader stated. Meanwhile, a tender for PCI produced by Russia’s Mechel has been closed at $199.10/mt CFR China compared to $193/mt CFR in a tender closed at the end of August. On the contrary, the ex-Russia K10 coking coal price has declined by $3/mt in Mechel's latest tender compared to the previous sale.

Meanwhile, Australian PCI suppliers have followed the same pattern. Specifically, while in its September offers an Australian PCI supplier has been seeking to get $250/mt FOB Australia, October offers have been voiced at $305/mt FOB. “Everyone is acting cautiously now. In the winter period, some trade happens but most potential suppliers are focusing on the procurement for their own plants. That adds support to prices,” a Japan-based trader stated.


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