En+ Group eyes China as target for coal exports
En+ Group, the parent company of Hong Kong-listed aluminium giant Rusal as well as power generator and local listing candidate EuroSibEnergo, aims to double its coal reserves and output in three to five years and targets selling a third of its output to China.
The aggressive goal comes after En+ started exporting coal to China in the middle of this year.
The Russian resource mining and electricity conglomerate hopes to double its power-station coal reserves to 2 billion tonnes and up annual output to between 25 million and 30 million tonnes in three to five years, director of strategy Dmitry Yudin said. Some 8 million to 10 million are targeted for China.
The company had a 'pilot' agreement to supply coal to China that took effect around the middle of this year, Yudin said. He would not disclose the buyer's name.
Most of En+'s coal reserves are held by EuroSibEnergo and located in eastern Siberia north of Mongolia, he said.
The coal is currently moved by rail some 2,500 kilometres east to the Vanino port on the eastern seaboard, before it is shipped another 2,500 kilometres to Shanghai by sea.
Despite the long freight distances, Yudin believes the coal can be sold in China competitively due to low coal mining costs (the coal can be extracted from the surface without underground mining), and because rail freight costs are low due to spare capacity. 'In the longer term, infrastructure upgrades will be necessary but we don't face an immediate [railway] bottleneck,' he said.
He said En+ was mulling co-investing in power plants in Russia or Mongolia to burn coal and send power to China, but that big infrastructure investment was required to make that happen.
Russia is planning to raise coal exports to China by 25 per cent to 15 million tonnes a year from 12 million tonnes last year.
China became a net coal importer for the first time last year, with import volume surging 212 per cent to 125.83 million tonnes. This was still a fraction of the country's 3 billion tonne consumption. Coal imports grew and exports fell as the global economic slump sapped prices in the seaborne market and hit demand in industrialised nations.
Russia's coal exports to China rocketed to 12 million tonnes last year from 760,000 tonnes in 2008 when sky-high freight rates prevented significant exports.