Russian coking coal producer Raspadskaya lost a net $126 million in 2013, quadrupled from a net loss of $29.5 million a year ago, as its share of exports in its overall sales volumes grew to 42% due to weaker domestic demand, Raspadskaya said Wednesday.
Raspadskaya's exports, mostly of washed coal, as a percentage of its overall sales were up from 18% (770,000 mt) of sales in 2012, the company reported in its 2013 results.
Raspadskaya's average 2013 export price, however, rebased to common delivery terms of FCA Mezhdurechensk, was much lower than it obtained on the domestic market due to high shipping costs to buyers in the Asia-Pacific and Ukraine, it said.
Raspadskaya's 2013 export price to Asia averaged $57/mt, or 25% below the average price a year ago and 35% below the 2013 average Raspadskaya secured from Russian companies.
"Under conditions of weak demand, in order to maintain competitiveness, when setting the price we have to take into consideration the distance to market, cost of transport, and availability of coal from other countries," the company said.
In addition, Raspadskaya sold significant spot volumes to expand its client base in the Asia-Pacific market, with a view to shifting more future sales to quarterly contracts, and was therefore affected by weak Chinese spot prices and a shift of the international coal trade from benchmark to spot indices.
Raspadskaya's $545.4 million revenue in 2013 was largely unchanged from 2012.
Raspadskaya is part of Russian integrated mining and steelmaking company Evraz.
Raspadskaya's cash cost per mt of coal concentrate decreased by 11% year on year to roughly $55 as a result of a series of cost-cutting initiatives. The weighted average selling price of semi-hard coking coal concentrate in all regional markets, rebased to FCA Mezhdurechensk, was $76, down from $105/mt in 2012.
Partly to reduce cash costs, Raspadskaya has been implementing a plan to increase mine production, including at the Raspadskaya mine where production is being gradually restored after the accident in 2010. The Raspadskaya mine in December 2013 commissioned a longwall with 900,000 mt of reserves and this month a longwall with 1.5 million mt reserves. Both are to be developed though 2015. Raspadskaya plans the commissioning of two additional longwalls this year, it said Wednesday.
In 2013, Raspadskaya delivered 7.8 million mt of raw coking coal, up from 7 million mt in 2012.
Raspadskaya's profitability is highly dependent on limited geographical markets. For instance about 58% of its revenues are derived from Russia and 31% from the Asia-Pacific region. The recent political developments around Ukraine may impact Raspadskaya's revenues: sales to Ukraine provided 7% of its total revenues in 2013. Raspadskaya may also be hit by potential government sanctions.
Raspadskaya anticipates, it said Wednesday, that the long-term supply-demand balance is likely to be affected by increasing use of pulverized coal injection (PCI) in steelmaking, which allows for lower coal consumption and increases the use of lower quality coals.
However, the company believes there will be no significant increase in coking coal capacity in Russia in the short- to medium-term because subsurface producers have postponed new capacity launches, it said. This is partly because geological and mining conditions are becoming more difficult, meaning new mine construction and commissioning requires more time and investment, the company said.
