August 5, 2019 - Russian coal production in July declined to a two-year low of 1.09m tonnes/day, as producers seemingly reacted to low seaborne prices, provisional energy ministry data showed on Friday.

Production was a marginal 0.6% lower on the month, although year-to-date output was still 0.6% higher, at 246m tonnes.

A dry bulk strategist with a European trading firm said the decline was “interesting”, particularly in light of June’s 17-month low of 1.10m tonnes/day.

“June wasn't an outlier, they really cut at current levels,” he said.

Exporters have struggled with lower demand this year, with high consumer stocks in the Atlantic and Pacific basins resulting in seaborne prices sliding to multi-year lows.

The Global Coal Des ARA index – a benchmark for Atlantic basin coal trading – averaged UD 64/t in the first seven months of the year, around 30% lower than in the same period last year.

A coal analyst with a European energy firm said earlier this week Russian producers had restricted production in response to the lower prices.

“This behavior will be maintained by Atlantic producers, which should limit further losses for the front month contracts,” she added.

Export Weakness

At the same time, Russian exports last month declined 1.1% on the year to 541,00t/day, although they were still 6% higher than June’s three-month low – of 511,000t/day – the figures showed.

Exports in January-July were 0.9% higher, at 111.4m tonnes.

Meanwhile, state-owned Russian Railways (RZD) handled 940,000t/day of coal in July, down 3% on the year, in part due to reduced shipments to Poland and Ukraine.

But the total was up from June’s two-year low, of 920,000t/day, when railed exports to Ukraine fell to zero.

Exports to the country were expected to pick-up again in July.

Year-to-date railed shipments – to domestic destinations, as well as to neighbouring countries and export ports – totalled 216m tonnes, down by a marginal 0.1% compared with January-July 2018.

First-half railed shipments – to domestic destinations, as well as to neighbouring countries and export ports – totalled 216m tonnes, down by a marginal 0.1% compared with January-July 2018.