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Steel Mont Cancels Ukraine Coal Supply Contract


Steel Mont Trading Ltd. will cancel its contract to deliver thermal coal to Ukraine after delivering less than half the agreed amount as the eastern European nation seeks to secure supply before freezing winter weather.

The London-based company agreed in August to supply 1 million metric tons of South African coal to Ukrinterenergo, a state-owned foreign trade company. It is pulling out of the contract because it doesn’t want to become involved in the country’s domestic “political situation,” Steel Mont CEO Rajesh Saraiya said today by telephone.

Fighting between Ukrainian forces and pro-Russian rebels in the eastern Donbass region has hampered the nation’s coal production, which more than met its own needs before the conflict broke out at the start of this year. The country is looking to imports to fill the shortfall even as it struggles to secure sufficient natural gas to meet winter demand after supply from Russia was halted amid a price and debt dispute.

“We have given verbal notification to Ukraine that we would like to stop the contract; we will send tomorrow a formal letter,” Saraiya said. “We’re a commercial company; we don’t want to be dragged into a political dispute.”

Seventy percent of the 83 coal mines in the east of the country were shut by the conflict as of September, defense council spokesman Andriy Lysenko told reporters in Kiev Sept. 12. Ukraine will need to import as much as 4 million tons of coal by the end of the year to meet heat and power generation needs, Deputy Energy Minister Vadym Ulyda said Oct. 14.

Alternative Sources

Minimum temperatures in Kiev, the capital, will fall below freezing from Nov. 16, according toAccuWeather Inc. Ukraine is looking for alternative sources of coal, according to Energy Minister Yuri Prodan.

“The company which was supplying coal said it wouldn’t continue supplies to Ukraine’s power company Ukrinternergo,” Prodan said today during a government meeting. “We have two choices: we can buy coal from Russia, or we will have to buy coal from the area controlled by Russian groups.”

Steel Mont will ship 494,000 tons of the fuel in six cargoes at a delivered price of $86 a ton, according to Saraiya. The company has completed two shipments of South African coal to ports on Ukraine’s Black Sea coast, one vessel is discharging at present and a further cargo is due to enter the Black Sea on Nov. 23, he said. Two more vessels are loading at Richards Bay, South Africa.

Ukraine’s coal output in the nine months through September tumbled 19 percent to 38 million tons, compared with 46 million tons a year earlier, according to data from the State Statistics Bureau. Production dropped sharply in July and August as fighting damaged rail links and forced miners to stop work.

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