War at Eastern Ukraine lead to serious decreasing or even interruption of coal production at Donbass area. This will also dramatically effect on Eastern Ukraine main steels works like Azovstal, Krivorozhsthal and others as they depend on metallurgical coke supply from Donbass area. Under these circumstances Russian steel works like Magnitogorkiy and Severstal might have advantage on Black and Mediterranean market and so increase their export volumes which were falling since y 2008 crisis. Only one Mariupol port which is just 20-30 km away from front line now ( actually already in range of artillery blast) is handling 15-17 million tones’ of cargoes annually of which 8-9 m tonnes gives exports of steels from local steel works which may escape now and about 3-4 m tonnes of coal from local mines which are now disabled. Most of these cargoes went Turkey and Mediterranean destinations.
So we might have strong demand for Russian coal and steels at Black Sea region within next two months. Situation is also supported by the fact that after Turkey mine disaster in May 2014 Turkey has significantly decreased it’s own coal production and will doubtless require much coal for heating and energy generation purposes during late autumn/winter 14/15. Ukraine might also purchase Russian coal for heating purposes as gas problem is not solved yet. Steels production and logistics reaction time is about 1,5 -2 months, so we may not feel these changes immediately. Another concern is that port facilities of Russia will not allow increasing rapidly supply of coal and steels as good crop and strong gain trade occupies much of transshipment facilities at Black Sea region. We expect that coal and steel products might appear at the end of October 2014 supporting sea-river market from seasonal failure and keep market high at least up to end of the heating season at late March 2015.
