European buyers are scouring the world as far as South Africa to procure coal as Russia’s invasion of Ukraine and the threat of more sanctions on Moscow have made Russian coal unsellable with many European utilities.
Several carriers with coal have headed from South Africa’s Richards Bay Coal Terminal west around the Cape of Good Hope since last week, according to vessel-tracking data Bloomberg has compiled. Coal heading west from South Africa is not the typical export route for the large African coal producer and exporter, as it ships over 86 percent of its coal east to Asia.
The Russian invasion of Ukraine, however, has changed trade routes for many commodities, including for coal. Traders and utilities have started to steer clear of Russian seaborne commodities, including crude oil, LNG, and coal, as many firms and traders are in a “self-sanctioning” mode not taking any risks with any cargoes from Russia.
Coal flows from South Africa, the United States, and Colombia to Europe have increased over the past few weeks, Bevan Jones, chief executive officer of consultants African Source Markets, told Bloomberg.
Since the SWIFT sanctions against Russian banks this past weekend, trade in energy commodities has started to see disruptions, despite the fact that Russian energy is carved out of sanctions and banking payments.
As a result, coal and natural gas prices are surging in Europe and Asia, and international crude oil benchmarks are on a tear, too.
This week, European thermal coal prices surged to record highs.
“European thermal coal prices have surged to record highs with futures prices above US$400/t until Q4 2022. Some buyers in Japan and Europe have already indicated they are looking to replace Russian supply, and non-Russian thermal coal in Europe is attracting a significant premium over Russian material,” Wood Mackenzie principal analyst Rory Simington said on Thursday.
According to WoodMac, “Russia would not be able to quickly make up for a loss of European demand by pivoting to Asia (China) due to limited eastbound rail capacity.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.