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Russian mine blast to drive up coal prices


MOSCOW, May 10 (Reuters) - Explosions that killed more than 30 people and trapped dozens in Russia's biggest underground coal mine may have a significant impact on the tight coal market and the mine owner's financials, analysts say. Coal shipments from the Raspadskaya mine, 3,000 km (1,850 miles) east of Moscow, had not stopped on Monday following Russia's deadliest mine disaster in three years, but coal inventories will run out in two or three days, the company said. According to state-run news agency RIA Novosti, Raspadskaya director Gennady Kozovoy said that after three days the shipments from the mine, which accounts for more than 80 percent of the company's coal output, could be cut by 50 to 60 percent. Company officials said it was not yet clear when production would be restored at the mine, which has some 360 kilometres of tunnels and an annual capacity of 7.5 million tonnes. Raspadskaya, Russia's largest standalone coking coal producer with estimated reserves of some 450 million tonnes, is part-owned by steel-and-mining firm Evraz Group. "It's a real tragedy and the market was already undersupplied...Without doubt the prices will go up, Raspadskaya is a very big supplier," said Gerard McCloskey, chairman of The McCloskey Group, a consultancy and news provider. "And I think that Evraz will look for alternative supplies of its own steelworks. And you will likely to see a sharp increase of prices internally in Russia as well," he added. The disaster may also hit Raspadskaya's profitability. "Judging by the number of casualties it's a huge explosion and obviously the news is critical for the company. Taking aside the disastrous number of casualties, the production will fall," Igor Lebedinets from VTB Capital said. "In addition, I don't rule out the possibility of a big fine from regulators, compensation for the families," he added. SPOT-TRADED The coking coal market globally is becoming far more spot-traded than before and big miners want to set quarterly prices to reflect spot values. Coking coal prices have risen sharply in recent quarters after collapsing when demand from steelmakers dried up at the end of 2008. Raspadskaya has said it will up domestic coal prices to $130 per tonne starting from the second quarter from $100 in the first quarter. "Really what they must do is to fix the problems at the mine and start production as soon as possible, that's the only way -- there is no surplus of coking coal in Russia or anywhere," a Russian coal source said. "There is strong demand for coking coal all over the world -- India, China, and also very strong within Russia... But they could maybe substitute some coking coal from Ukraine for the Russian market." (Reporting by Jackie Cowhig in London and Vladimir Soldatkin in Moscow; Editing by Keiron Henderson) Keywords: RUSSIA MINE/IMPACT (vladimir.soldatkin@reuters.com, +7 495 775 12 42, Reuters Messaging: vladimir.soldatkin.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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