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Kazakhstan wants to export coal to Ukraine, China and Europe

02 june 2014, 17:35
0
Photo ©REUTERS
Photo ©REUTERS

Kazakhstan produces around 112 million tons of coal a year, that's last year's figure, and we plan to stay within 100-120 million tons a year until 2030, Kazakhahstan Minister of Industry and New Technologies Asset Issekeshev said last week in Astana, Tengrinews reports. 

"Coal is going to remain the main fuel for our thermal power plants, but we export around 30 million tons of coal to Russia, and we see our exports start to decline. In the long term perspective we will have to look for new export opportunities. We plan to consider Europe, China and other markets," he said. 

According to Minister Issekeshev, finding new markets is not the only option for Kazakhstan: it is considering deep processing of coal - coal fuel chemistry - as the other option. If Kazakhstan succeeds in this technology-intensive industry, it will be able to use its vast coal deposits to produce gasoline, diesel fuel, electricity and chemical products. 

"New export opportunities and processing of coal will help us compensate lack of increase in our coal output and dwindling of export to Russia in the long run," Minister Issekeshev said.

Russia is trying to reduce its reliance on foreign supplies and develop production of it own raw materials to boost its domestic coal industry amid the economic slowdown.

Since Russia in the only large importer of Kazakhstan's coal and this export direction consumes one fourth of what Kazakhstan produces, loss of this market could still be pretty painful for Kazakhstan's coal industry.  

According to a lead analyst of Wild Bear Capital Victor Neustroev, Kazakhstan is viewing Ukraine, China and Europe as most likely new markets for its coal. “There are no plans on increasing the production, only to redistribute the export. We just need to find a new market for it,” Neustroev said.

Neustroev believes that Kazakhstan should consider exporting coal to Europe and Ukraine, especially if Russia decides to cut gas supply to these two destinations. “Ukraine is using its coal production capacities to its fullest at the moment, so if they will have to decrease their gas consumption, their transfer to coal-fueling would be economically viable for Ukraine (and beneficial for Kazakhstan). Concerning Europe, despite the negative attitude of environmentalists towards coal, there are some opportunities there, too,” the analyst said.

He added that China was also a very attractive market for Kazakhstan's coal.

Speaking about the Chinese market, an analyst from Finam Management Dmitry Baranov said that even though China planed to decrease coal-feuled power generation over pollution concerns, the country would not give up coal altogether.

Neustroev agreed that China coal consumption was still quite high and was unlikely to go down in a short term perspective. “China’s economy is developing rapidly and it need new resources. It is possible that China will even increase import of coal by 15-20% in the coming five years,” Neustroev said.

According to Anna Bodrova of Alpari analytical company, Kazakhstan is using most of the coal it producers for its own needs. She reminded that in 1992-2005 its coal export did not exceed 18% of its coal production, and was even below that level most of the time. "The export has been growing starting from 2006, and eventually reached 25% of the output. In the meanwhile, it is unlikely that Kazakhstan can achieve a large increase in coal output at this point. In 2008, it produced 104.9 million tons of coal, and only 32.9 million tons were exported. This was the 10 years maximum. In 2013, 119.8 million tons of coal was produced and 30 million tons were exported,” Bodrova said.

The analyst forecasted that this year's Kazakh coal export would be at 32 million tons, but added that production of coal in Kazakhstan was decreasing this year.

At its domestic market Kazakhstan uses coal for two main purposes: electric power generation and heating, and to fuel furnaces at metallurgical plants. Three largest metallurgical companies operating in Kazakhstan - Arcelor Mittal Steel, KazakhMys and ENRC - have long been complaining about a decline of demand for their goods at the international markets amid the global recession, and about depletion of mines in case of KazakhMys' copper mines. If they have to decrease their output due to lack of demand, they will decrease consumption of coal, dealing a blow to Kazakhstan's coal industry and triggering a further decrease in the coal output.

But Ms. Bodrova gave a pretty optimistic forecast: “The demand for Kazakhstani coal will remain at the existing level. Asian countries are going to buy it anyway, because the price is low due to low transportation costs,” Bodrova said.

Kazakhstan holds the 8th place in the world by coal deposits. The largest coal deposit is situated in Karaganda Oblast in central Kazakhstan.

Reporting by Azhar Ashirova, writing by Gyuzel Kamalova, editing by Tatyana Kuzmina 


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