Global coal prices began to rise due to the new sanctions announced by the European Union against Russia, including a ban on coal imports from the Russian Federation in the amount of 4 billion euros annually.
Russia is the third largest supplier of thermal coal and dominates sales to European countries.
According to Bloomberg, the new sanctions mean increased competition in the marine fuel market, which is experiencing unprecedented price fluctuations this year due to disruptions in supply chains.
April coal futures in Newcastle, Australia jumped 6.4% to $281 a tonne on Tuesday, the biggest gain in nearly two weeks, according to ICE Futures Europe.
Analysts believe prices will continue to rise as European consumers intensify their search for alternatives to Russian coal.
Representatives of the coal industry in Indonesia, the world’s main supplier of thermal coal, said they were contacted by buyers from European countries, including Italy, Spain, Poland and Germany. It is unclear whether suppliers will be able to increase exports because they have limited spare capacity and are required to prioritize domestic demand.
Coal producers in Australia, another major exporter, said they had limited scope to increase sales in Europe.
“Low investment in new capacity and relatively strong demand in Asia are preventing the market from filling any shortfall caused by the decline in Russian exports,” analysts at Australia & New Zealand Banking Group Ltd said in a note. They said Russia accounted for about 18 percent of global coal exports in 2020.
Increased demand for electricity and a lack of new coal supplies will keep prices higher, said David Lennox, commodity analyst at Fat Prophets in Sydney.
Coal futures in Northwest Europe rose to their highest level in one month, as a ban on imports from Russia could significantly tighten the situation on the global market. Next year’s contracts are rising for the third consecutive auction, rising 6.5% on Wednesday to $230 a ton. May futures rose 11% to $330 a ton.
Morgan Stanley said in a statement that European utilities and traders are likely to increase imports from South Africa, Colombia, the United States and even Australia. He notes that “reconfiguring global trade flows in such a scenario will take time and increase costs.”
Earlier this week, official US data showed that coal prices shipped from the central Appalachian Mountains topped $100 a ton for the first time since 2008 and from the Illinois coal basin since 2005.
US coal exports rose 23% in 2021 and are expected to increase 3.3% this year as miners look to benefit from record prices in global markets.
