November 9, 2019 - Russian Sibanthracite Group is looking to replace Australian coal as it boosts its export infrastructure to meet growing coal demand inAsia, an executive said Friday.

That came as the world's largest anthracite coal exporter finalized details to construct a new 15-km Severomuysky-2 railway tunnel withUS-based builder The Robbins Company.

It will be the second tunnel on the 4,264 km-long Baikal-Amur Mainline (BAM) railway, which travels from Taishet in Eastern Siberia to Vanino in Russian Far East where it links to the Asian markets.

"Asia is our key market and we see a steady increase in demand for Russian metallurgical coals and anthracite to replace Australia's coals," Cory Bougoure, CEO of Sibanthracite Overseas Pte, told S&P Global Platts.

"We should also take into account the logistic proximity of Russia [to Asia] as a supplier of these metallurgical coals," Bougoure said.

The main demand for Sibanthracite products, he noted, is concentrated in Asia, with its key markets in China, India, Korea, Japan and other countries in Southeast Asia.

Logistics Limitations

However, logistic restrictions on cargo delivery including railway and port capacity at the Far East have been limiting the volume of the company's exports, Bougoure said.

The existing Severomuysky-1 tunnel has an annual throughput limited to 16 million mt which Sibanthracite Group said it takes up much ofit.

That capacity was insufficient to meet growing demand for its anthracite in the Asia, the company said. With the construction of the new tunnel, annual freight volume will see an increase from the current 16 million mt to 100 million mt, it said.

The $1 billion project is scheduled to start late in 2020, and was expected to be completed by the end of 2024, Bougoure said.

Sibanthracite produced around 23 million mt of coal annually, of which 15 million mt is anthracite, with the rest include PCI and thermal-type coal, said Bougoure.

Demand Surge in Asia

Meanwhile, major spot market buyer China has increased its imports of Russia's metallurgical coal.

From January-September, China imported 4.34 million mt of coking coal from Russia, up 17% year on year, according to China customs statistics.

Russian coal accounted for 7% of China's imports over January-September, compared with Australia and Mongolia which each accounted for 45%.

However, India has seen a surge this year in Russian pulverized coal injection as steelmakers look to lower their cost of production, sources said.

According to India's Ministry of Commerce and Industry, India imported 2 million mt of Russian PCI from January-August, up 94% year on year.