As Russian sanctions imposed over the invasion of Ukraine limit everything coming into and going out of the country, and Europe confronts an energy crisis over the diminished gas flows coming from Russia, the price of coal is skyrocketing.
As Europe weans itself off Russian coal, suppliers are turning to other countries from Colombia to South Africa, to Australia to make up the lost supply. Previously priced at $134 per metric ton at the start of the year, coal is now going for up to $400 per ton, which has driven producers to amp up mining operations, and that had increased the flow of money all the way down to the salaries of individual miners..
César Pardo, a miner who is making three times what he was making just three weeks ago, says, “It’s a very good moment. With prices today, there’s a lot of business going around for everyone, from the smallest (mines) to the very biggest.”
The European Union embargo on all Russian coal products will enter full force in less than two weeks, causing importers to frantically search for suppliers elsewhere in the world, to be ready for the day all Russian sales are cut off.
Meanwhile demand is increasing. Germany, facing Nord Stream pipeline flows of Russian gas that are 20% of flow capacity, has been reopening shuttered coal electrical plants. That has created new demand for thermal coal used to generate electricity.
To satiate that demand, Germany has turned to Australia, the world’s second-largest exporter of thermal coal, to fill the void. Germany’s imports of coal from Australia rose 21% between March and May compared with the same period in 2021 according to Trade Data Monitor. Australia supplied approximately 17% of Germany’s coal in that period.
Meanwhile German imports of South African coal were over seven times what they were a year back during that three month period. South African coal, which had comprised less than 1% of Germany’s imports a year prior during that period, saw its share increase to 8.1% of the nation’s imports. Colombia quadrupled its shipments to Germany during the March-May period compared to a year prior, now making up 10% of German imports. US shipments increased 10% over the same period.
The Paris-based International Energy Agency has said it expects coal consumption in the EU to rise 7% this year.
The surge has happened despite the concerns of environmentalists, who feel coal is among the dirtiest fuels, and is particularly problematic with respect to greenhouse gas emissions. However, Nicolás Arboleda, mining and metals analyst at Baker McKenzie in Bogotá, the Colombian capital notes, “The world has changed. Thermal plants using coal in Europe are again active.”
Russia had supplied roughly 46% of the coal the EU consumed in 2021 and about 40% of the bloc’s natural gas. Now the EU has had to turn to a raft of new suppliers all over the globe.
Deepak Kannan, head of global coal pricing at S&P Global Commodity Insights noted, “The impending ban on Russian thermal coal has seen European demand spill over to sources such as South Africa, Australia and Indonesia, which have been traditionally the main sources of coal to Asia.”
