Coal prices are soaring due to the European Union’s proposal to ban the import of Russian coal. The potential sanction from the EU threatens supplies of this fuel worldwide, as the coal market is already experiencing unprecedented price volatility due to production disruptions and supply problems due to the corona pandemic.
Russia is the world’s third-largest supplier of thermal coal used by power plants and dominates sales to European countries. According to Statistics Netherlands (CBS), in 2020, more than 40 percent of the coal and lignite that the Netherlands imported for its own use came from Russia.
On Tuesday, the European Commission proposed the fifth package of EU sanctions against Russia over the war in Ukraine, including an import ban on Russian coal. However, the proposal still needs to be approved by the EU countries.
Coal prices for April rose by more than 6 percent to $281 per tonne. According to ICE Futures Europe, that is the largest increase in nearly two weeks. Prices are expected to rise further as EU countries hunt for alternatives to Russian coal.
Miners in Indonesia, the largest shipper of coal for power plants, have already been approached by some potential buyers from the EU. These include Italy, Spain, Poland, and Germany, said Hendra Sinadia, the Indonesian Coal Mining Association executive director.
It is not clear whether Indonesian suppliers will be able to ramp up their supplies as they have limited spare capacity and must prioritize local demand first to ensure domestic energy supply. In addition, producers in Australia, another major coal exporter, have indicated that they have limited opportunities to increase sales to Europe.
“A lack of investment in new capacity and relatively strong demand in Asia has prevented the market from filling the gap left by sanctions on Russian exports,” Australia & New Zealand Banking Group analysts said in a report on Wednesday. According to analysts, Russia accounted for about 18 percent of global coal exports in 2020.
