Strengthening economic cooperation with China is in the historical interests of both of China and Russia
Published: Apr 11, 2023 11:19 PM
China Russia Photo:VCG

China Russia Photo:VCG

Today, energy cooperation between the two great powers, China and Russia, is at an unprecedentedly high level. This notion was repeatedly expressed by the leaders of our countries during  President Xi Jinping's historic visit to Moscow. This type of cooperation not only contributes to the prosperity of our nations, but it also helps to defend our national interests on the international arena.

Serious changes in world politics also contribute to the strengthening of cooperation, which will undoubtedly determine the world landscape for many years to come. These changes have affected the coal market as well. In particular, Russian coal companies had to practically almost leave the European market due to sanctions, while some equipment and spare part manufacturers from Europe, as well as other US allies withdrew from the Russian market.

The departure from Western markets was not entirely unexpected for us. The coal market in Europe has been steadily declining for a long time, primarily due to the prevailing political movement to abandon the use of coal in the energy sector. Therefore, the past year has only accelerated the changes in Russian coal exports. The countries of the Asia-Pacific region have become a priority market, where China occupies a special place as the largest economy and a friendly country. According to President Vladimir Putin, Russia has become a strategic supplier of energy resources to China and is able to "satisfy the growing demand from the Chinese economy, both as part of the current projects and those that are currently being negotiated." 

I would like to share my vision for further cooperation development prospects between Russia's largest coal company SUEK and Chinese partners. I am wholeheartedly convinced that we have yet to realize the full potential of this cooperation. 

Most importantly, we can see that China's energy policy is guided not by the political situation, rather by the interests of security and economic growth, not oblivious to the environment and its own international commitments under the Paris Climate Agreement.This is where our country's priorities coincide. This is the reason why all types of energy are developing harmoniously in China, including coal, which in its development relies on new environmentally friendly technologies and environmentally friendly fuel with a minimum content of sulfur and other harmful admixtures. That is exactly the high-quality enriched fuel that SUEK supplies to China. The capacities of our enrichment plants allow us to refine 100% of the coal supplied for export.

The demand for Russian coal products on the Chinese market is evidenced by the increase in import, which last year amounted to 19%.  Russian coal supplies to China more than doubled, compared to 2019.  The logistics constraints experienced by SUEK prevent us from fully realizing our export potential, but our deliveries to China last year were only a couple of percent short of  the 2021 volumes. In the first 2 months of 2023, our coal, petcoke and iron ore concentrate deliveries to China have already amounted to almost 3 million tonnes, which is good groundwork to exceed last year's volumes.

However, the capacity of Russia's largest coal energy company, SUEK, far exceeds the achieved level of more than 10 million tonnes of cargo. Dozens of coal cuts and mines, 10 processing plants, mining enterprises and several high-tech service enterprises capable of producing sophisticated equipment and spare parts operate under our management. Every year we supply more than 50 million tonnes of high-quality coal, and other energy and raw materials to foreign markets.

SUEK has one of the largest wagon fleets in Russia, with more than 53,000 gondola cars under our management, of which 65% are innovative. Our own logistics infrastructure allows SUEK to unload up to 5,500 wagons per day. The company owns large bulk terminals in Russia's Far East and North. We have every opportunity to increase reliable, stable supplies of high-quality coal to our Chinese partners.

At the same time, we intend to increase the volume of Russian coal exports both by increasing sea shipments and by developing land exports through border crossings. In order to develop supplies and interact with Chinese consumers, SUEK established a subsidiary company SUEK Shanghai Trading, in China with a central office in Shanghai and branches in Beijing and Harbin. 

In addition to Russian coal, SUEK is actively developing the supply of other raw materials to China, including thermal and metallurgical coal from third countries, petroleum coke, biomass and iron ore. In 2021, the sales volume of these goods to China amounted to 3.7 million tonnes, and to 3.4 million tonnes, according to 2022 results. In particular, the sales of petroleum coke on the Chinese market are carried out through our own warehouse terminals, where fuel from different manufacturers is blended to create a product that meets the consumers' needs. This is also an important area that we plan to develop on the Chinese market.

Another promising area of development is the supply of electricity to China, which is currently at a record level. SUEK's energy division, SGC, is the 6th energy company in Russia in terms of installed power plant capacity.

I would also like to point out that mechanical engineering is also a promising area of cooperation between SUEK and our Chinese partners. Due to the departure of a number of European companies, the share of our purchases of equipment from China, India, Turkey, South Africa, Belarus and other friendly countries has grown. The range of products that we produce at our 11 repair and machine-building plants is constantly expanding. This allows us to provide our enterprises and other mining companies with the necessary components and services. At the same time, we are open to expanding cooperation with fellow machine builders from China, who have the necessary competencies to produce what the industry demands. These products can be produced both in China, and at our enterprises, and as part of a joint venture.

Strengthening cooperation between SUEK and our Chinese partners in the coal, energy and related industries is in the best interests of both of our countries, the regions where our enterprises are located, and the tens of thousands of our employees. This is clearly visible both from the heights of state policy and in an ordinary mining village. 

Both our countries' governments have already done so much to improve the terms of cooperation, in particular, in the field of payments and debottlenecking the transit railway infrastructure. SUEK is also ready to help strengthen economic cooperation between our countries and will expand mutually beneficial ties with Chinese partners in every possible way.

Maxim Basov is SUEK CEO.