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Energy Crisis Worsens As Russia Delays Coal Supply

Coal prices are rising again as the Russia-Ukraine crisis has put energy markets on alert and Russian coal producers struggle to get their coal via railways to export terminals due to COVID-related railway staff shortages.

JSC Kuzbassrazrezugol (KRU), asked customers to postpone initially planned deliveries of coal for the first and second quarter of 2022 by one quarter, in a letter to clients dated February 18 and seen by Bloomberg News.

“Without prejudice to our rights and obligations we kindly ask you to consider postponing the deliveries previously planned,” Roman Ershov, director of Cyprus-based KRU Overseas, wrote in the letter cited by Bloomberg.  

There are “critical staff shortages” at Russian Railways due to the Omicron wave, KRU said in the letter, adding that the “situation is the same for all coal producers in Russia.”

Kuzbassrazrezugol (KRU) is the largest producer of high-quality coal in the Kuzbass region of Russia, with an annual production of about 50 million tons, according to KRU Overseas’ website.

Russia accounts for some 20 percent of global trade in coal, and COVID-related supply disruptions in the logistics of getting coal to foreign markets further tighten the global coal market, which had just gone through a month-long export ban by Indonesia.

The market is now spooked by this week’s escalation of the crisis in Ukraine after Russian President Vladimir Putin recognized two breakaway regions in eastern Ukraine as independent republics and sent troops there on a “peacekeeping” mission.

Apart from Russia and Indonesia, coal supply is not at full capacity in major exporters Australia and Colombia, too, due to staff shortages in the Omicron COVD wave.

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On Wednesday, European coal prices jumped to their highest level in four months amid global supply constraints and the crisis in Ukraine. 

By Charles Kennedy for Oilprice.com

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