Ukraine may import coal from Kazakhstan as coal deficit intensifies

Kazakhstan is going to supply coal to Ukraine, according to a statement made by President Nursultan Nazarbayev after his meeting with Ukrainian President Petro Poroshenko on Dec. 22. Meanwhile, Ukrainian thermal power plants (TPPs), dependent on anthracite coal from the occupied territory of Donbas, are suffering from a severe deficit of coal as of Dec. 22, with only two power units operational at DTEK’s Prydniprovsk (out of 8) and Kryviy Rih (out of 10) power plants.



The deficit is even more harsh at the anthracite-burning power plants of Centrenergo (CEEN UK): only one power unit at its Zmiyiv TPP (out of 10) was operational, and no coal-fired units were working at its Trypillia TPP (out of 4). The latter station was operating with a gas-burning power unit (out of two such units), whose production cost is twice as expensive as for coal-fired units.



Total coal stockpiles at Ukrainian TPPs were 1.09 mmt as of Dec. 22, according to the Ekonomichna Pravda news site (vs. 4.19 mmt a year before), including 0.23 mmt at TPPs burning anthracite and lean coal (vs. 2.23 mmt a year before) and 0.86 mmt at seven TPPs burning the non-scarce types of bituminous coal (vs. 1.96 mmt a year before). The total deficit of power capacity as of the evening of Dec. 22 was 5.2 GW (or 20% of its peak demand, we estimate), according to Ukrenergo, the power system’s dispatcher.



Alexander Paraschiy: Kazakhstan was the tenth largest coal producer globally in 2013, producing nearly 115 mmt of coal, so it indeed could become a reliable supplier of coal to Ukraine. However, we do not believe Kazakh supplies will help much. Firstly, the coal mined in its Ekibastuz Coal Deposit does not fulfill the needs of Ukrainian TPPs, as it’s not anthracite or lean coal (which are scarce in Ukraine), although it’s close to them by profile. To burn it efficiently, Ukrainian TPPs will have to mix it with anthracite coal, which is most easily supplied from the occupied territory of Ukraine or Russia.



Secondly, coal supplies from Kazakhstan present the same quandary as coal supplies from Russian deposits in Kuzbas and Western Siberian deposits. Namely, they need to travel through the territory of Russia, whose government is engaged in military and economic aggression against Ukraine, and whose railway operator has blocked any coal supplies since Dec. 6.



The period of winter solstice (when electricity demand for lighting is highest) has been nearly passed, and Ukraine’s energy system has a chance to naturally decrease its deficit of electricity capacity, for a while. Nevertheless, it’s only the start of winter and the period of peak demand for electricity (for heating purposes, due to severe frosts) lies ahead, between mid-January to mid-February.



Current weather forecasts suggest the temperature in central Ukraine will fall from the current 0 ...-3 Celsius range to -12...-15 Celsius in two weeks, which will be a new test of the stability of Ukraine’s power system. At this moment, it’s not clear from where Ukraine will get its needed coal reserves, which usually account for about 40% of electricity production.



Meanwhile, Ukrainian industry is starting suffer from an electricity deficit, which is reflected in interim power cuts of selected enterprises during peak times. That has prompted some of them to already project falling production in December 2014 and the first months of 2015. For instance, Ferrexpo (FXPO LN) is planning for a 15% m/m decrease in output this month.

Источник: Конкорд Капитал