THE PRACTICE OF SELLING COAL THROUGH AFFILIATED INTERMEDIARIES CONTINUES

The sale of coal through a network of intermediaries affiliated with coal mines is still being continued.

To do this, coal mining companies use stock trading, where huge volumes (up to 3 million tons or up to 71% of the annual shipment volume) are sold within a few minutes to a limited number of suppliers that have not changed for several years (from 2 to 17).

These transactions are not secured by either payment or shipment of coal, and such intermediaries do not have the appropriate infrastructure (warehouses, loading and unloading equipment, etc.). Further, intermediaries sell coal with a surcharge that reaches 100%.

For example, in December 2022, Halyk Komir LLP purchases coal in the amount of 120 thousand tons at a weighted average price of 6,500 tenge/ton through the commodity exchange of JSC TB Kaspiy from JSC Karazhyra and resells it for 12,595 tenge/ton.

In this regard, the Agency for the Protection and Development of Competition of the Republic of Kazakhstan (AZRC) has adopted a Roadmap for the development of competition in the coal market, which provides for an increase in the share of exchange trades to 50%, sold directly to coal dead ends with appropriate infrastructure, without the participation of unproductive intermediaries.

In addition, in order to eliminate pocket exchanges aimed at large businesses and ensuring the sale of coal to intermediaries, the AZRC is working to revoke licenses to engage in exchange trading.

Thus, in connection with the violation of the legislation on commodity exchanges, the AZRK initiated 19 cases of administrative offenses, liquidated 6 commodity exchanges, 4 of which on a voluntary basis before inspection and 2 by court decision.

For more information, see the Agency's annual report for 2022:  https://www.gov.kz/memleket/entities/zk/documents/details/486951?lang=ru