Russian seaborne coal exports are estimated to have increased since Putin’s invasion of Ukraine and the EU announcement it was banning Russian coal imports from August. Declines in Russia’s exports to Europe, which was a key export market for Moscow before the war, have been offset by a rise in Russian coal shipments to China and India. Those two markets, the biggest coal importers in the world, grapple with energy and coal shortages, and Russian coal at steep discounts to international benchmarks is a welcome relief for their import bills at a time of soaring coal, natural gas, and crude oil prices.
The recent rise in Russian seaborne coal exports highlights the continued challenges the EU and the U.S. face in their efforts to cripple energy revenues for Putin, while at the same time not driving further up international energy commodity prices.
Just like in oil, trade flows in the coal markets have changed since the Russian invasion of Ukraine and the Western bans on imports of Russian energy. Russia pivots to the East, while Europe is importing more and more coal from top exporters other than Russia, including South Africa, Australia, and Colombia.
In addition, Russia’s significantly decreased gas supply to Europe has prompted some EU member states to return—temporarily, they say—to coal to conserve gas and keep the lights and heating on when the winter comes.
Germany will rely more on electricity generation from coal in order to conserve gas and fill its gas storage by winter, its Economy Minister Robert Habeck said after Russia slashed supply to Germany via Nord Stream.
This drives up coal demand in Europe, which is preparing to stop importing Russian coal as soon as next month.
In April, the EU imposed a ban on imports of coal and other solid fossil fuels from Russia as of August 2022 as part of the fifth round of EU sanctions against Russia over its invasion of Ukraine. The package includes “a prohibition to purchase, import or transfer coal and other solid fossil fuels into the EU if they originate in Russia or are exported from Russia, as from August 2022.”
While Europe is importing more coal from outside Russia, coal buyers in Asia, including China and India, have raised purchases from Russia, according to data from commodity analysts Kpler analyzed by Reuters columnist Clyde Russell.
Russia’s coal exports by sea were 16.45 million tons in June, compared to 16.56 million tons in May, per Kpler data. These export figures are up by 3.5% and 3.8% compared to June and May last year, respectively.
Chinese imports of Russian coal have been steadily high, while India has significantly raised its purchases in recent months. Russia’s share of Indian coal imports is still relatively low, at 4.4% last month, according to the data cited by Russell.
While China and India, as well as Turkey, boost coal imports from Russia, the EU, Japan, and South Korea have decreased their seaborne imports of Russian coal in recent months.
In early June, Russian coal exports to Europe fell to 10-15% of all coal exports, compared to 30% before the war, executives at Russian coal miners told Bloomberg.
Russian coal exports to Europe should stop in August when Europe will have to step up purchases from South Africa, Australia, and Colombia to procure supply, especially if it will run more coal-fired power plants in an effort to conserve the even more scarce gas ahead of the winter.
Europe has already significantly boosted imports of South African coal, with purchases from the main coal export hub in South Africa jumping by 40% in January-May 2022 compared to the whole of 2021, according to figures obtained by Reuters in June.
“With many importers now either unable or unwilling to import coal from Russia owing to sanctions or due to voluntary changes to their coal supply mix, an increasingly large pool of importers is now looking to secure coal from other origins,” Toby Hassall, Lead Analyst, Coal Market Research, at Refinitiv Commodities Research, said last month.
Meanwhile, Russian coal—just like Russian oil—finds willing buyers in China and India who benefit from steep price discounts.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- China Continues To Buy Record Levels Of Russian Crude
- Could Argentina’s Dead Cow Shale Patch Help Solve The Energy Crisis?
- Is Biden Really Responsible For High Oil Prices?