UPDATE 2-Russia hydro, rail shortage to cut coal exports

(Adds comments from hydro-electricity firm RusHydro)

LONDON/MOSCOW, July 7 (Reuters) - Russia's hydro power levels have fallen to the lowest for 16 years and coal-fired plants are struggling to take up the slack because a rail wagon shortage is making it hard supply enough fuel, Russian coal exporters said on Monday.

For years there have not been enough rail wagons available to move all the commodities competing for space, but the shortage of hydro power would make the situation worse this year, they said.

"It is much worse this year and it is earlier than usual this year because of the hydro power situation," said one of the largest coal exporters and suppliers of domestic coal.

Sergei Yushin, finance director of RusHydro (HYDR.RTS: Quote, Profile, Research), the world's second largest hydro-electric power firm after Hydro Quebec, said there is no clear solution for this year.

"The acute water shortages are in the European part of Russia, the stations on the Volga river, and these account for about one-third of our electricity production," Yushin told Reuters.

On top of that, there are around 20,000 rail wagons in Russia but 30,000 are probably needed, with old old wagons falling apart three times as fast as they can be replaced.

Higher coal prices make it more affordable to buy wagons costing over $40,000 each, but the supply is just not there.

"The Chinese don't have wagons to spare for export. They have their own huge need to meet," a Russian coal mining source said.