Given the distance between mining regions and major export hubs, transportation is indeed a considerable component in the economics of Russian coal businesses. For example, from the key mining region of Kuzbass to Russian export ports it currently amounts to USD 40/t on average. Moreover, it has been growing constantly and is now 19% higher than the USD 33/t in January 2012, while coal prices have declined 22% YTD from USD 112/t to USD 87/t.
However, we would not underestimate how long it might take to introduce such amendments, given that it could be too heavy a load for state monopoly Russian Railways, which has an intense capex programme for its railway network. Moreover, we are positive on coal prices going into 2013, which would effectively lower the tariff burden with coal mining efficiency. We see the news as neutral for the sector.