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The war in Ukraine is pushing most commodities higher, and coal is no exception. Bloomberg reported this week that the coal prices are reaching new record highs, with the Australia Newcastle benchmark hitting $446 per ton on Wednesday.
The daily increase for the benchmark amounted to $140.55 per ton, which was pushed the price to the highest since 2008.
In Asia, benchmark coal prices surged by 46 percent to a record. The region is the largest consumer of the dirtiest fossil fuel. Chinese buyers, in particular, have run into difficulties securing financing for Russian coal purchases because of state banks' wariness of U.S. and European sanctions against Russia's financial sector.
Russia is the world's third-largest exporter of coal.
"Most banks have stopped issuing letters of credit after the SWIFT sanctions. As almost all contracts are dollar-denominated, we have no other way to make the payment," one China commodity dealer told Reuters.
Some traders are in talks with Russian coal exporters to pay for the cargos in yuan, the Reuters report noted. "We're waiting for their response, but trades have been put on hold for now," one trader told the news agency.
Russian coal is especially important for China after it effectively banned imports from Australia amid a trade spat between the two countries. Europe, on the other hand, is seeking alternative suppliers of coal, just as it is seeking alternative suppliers of oil and, most importantly, gas.
This is a big opportunity for Australia, the Australian Financial Review wrote this week. The country is one of the biggest coal exporters in the world, and with the Chinese ban, it would only be too happy to tap new markets for its commodity.
"I would expect energy prices would continue to rise with that sort of conflict underway, the knock-on effect for us is the fact there are countries that would normally buy Russian coal that won't buy Russian coal at the moment," said David Moult, chief executive of Yancoal, a Chinese majority-owned Australian miner.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.