Russian Far East coal rail disruption extended after force majeure

London (Platts)--9 Aug 2017 1108 am EDT/1508 GMT

Further delays to coal railings are expected to the main Far East Russia export terminals in the aftermath of heavy rain damaging a section of track near Vladivostok, two sources said Wednesday.

Force majeure on various coal shipments out of Far East Russia was declared by several companies, sources said, and work moving around port loading laycans and meeting customer inquiries was taking place.

An initial three-day rail stoppage on the coal line due to end Wednesday has been extended preliminarily for a further two days, and this timeframe is expected to be extended, a mining source in Russia familiar with the development said. The railway operator notified companies directly about the extended delay, he said.

Russian Railways said a railings ban had been in place, but did not mention any extension, or confirm a derailment.

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"In order to eliminate track erosion on the Far East Railway, from August 7 to 9 a ban is in effect on loading any cargo to addresses of consignees at Blyukher, Khasan, Kamyshovaya, Posiet, Vladivostok, Cape Churkin, Gaydamak, Pervaya Rechka, Nakhodka, Nakhodka-Vostchnaya, Rybniki, Krabovaya and Cape Astafiev stations," the Moscow-based company said in a statement via email.

"Taking into account the general schedules of coal delivery and product stocks at port terminals, this delay will not have a significant impact on export volumes."

Heavy rain reported in Ussuriysk, Primorsky Krai, just north of Vladivostok, led to the halt, sources said. Work on affected tracks was taking place to meet safety standards for railings to resume, they said.

Ussuriysk had a burst of rain between Sunday and Monday, according to weather data.

Another industry source familiar with the line said work on repairs are ongoing following the derailment of wagons, and the earlier schedule of resumption was too "optimistic."

He said the degree of recovery depended on the terminals, and work needed to return tracks to condition. Some ports had limited railings due to earlier maintenance programs.

Disruption and delays in PCI coal supplies from Russia prompted regional buyers to try and cover upcoming needs, driving up prices Tuesday.

Wednesday was a national holiday in Singapore, the hub for regional commodities markets.

The rail line is the main artery connecting export terminals in Russia's Far East, including Vostochny and Nakhodka as well as Trade Port Posiet. Work this week on getting coal to the ports is at varying levels of progress, sources said.

"All are at different levels," one said. "Others may restart at low levels of operations."

The port of Vanino, further up Russia's eastern seaboard opposite Sakhalin island, is unaffected. A spur takes materials east to the port well before the choke point on the main line to Vladivostok area facilities.

Coal exports are directed to markets including Japan, South Korea, China and other buyers in Asia.

Railing plans have already been lowered from usual for smaller Pacific ports to rates around 60-65% currently, sources said.

Moving coal west to the Baltic ports is proving difficult, a source said, due to restrictions in Latvia and existing constraints at Russian Baltic ports.

Moving coal or loadings to alternative ports depended on customer preferences, a source said.

Companies' throughput contracts at ports may help to create some options where there is additional space or options to secure more.

It will not be possible to catch up with lost volumes resulting from the incident, a source warned. The railway is already operating above nameplate capacity, he said. Another industry source agreed, saying a return to normality on the line will nonetheless not make up for earlier lost shipments.

--Hector Forster,
--Edited by Jonathan Fox,

[Updated: adds Russian Railways, industry source comments]

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