Regional focus
already the biggest market for Russian coal, accounting for a quarter of all exports – was buying around €8m worth of coal per day more than at the start of the conflict, according to Statista. Between them, China and India bought up €4.5trn worth in the first eight months of the war. S&P’s Commodities at Sea database showed that year-on-year seaborne coal deliveries to China were up by as much as 55%. However, that thirst might still be tempered. Where sanctions are having a degree of success is in limiting the available routes to market and access to eastern customers, says Biggs. “Right now, [Russia is] basically at the limits of capacity to move coal to the east,” she says, adding that the European stance on the movement of Russian goods is making things more difficult. As a result, shipments are having to be routed via the sea, leaving north-western ports on their way to China, India and other parts of Asia, North Africa and Turkey.
This, along with other sanctions aimed at having direct and indirect financial consequences – such as increased shipment rates and insurance premiums – have left Russian coal producers facing increased costs. This comes at a time where Russia is having to sell coal at a reduced rate – sometimes at a 50% discount – brought about as a measure to stimulate sales in the face of international bans.
Questioning how sustainable it might be in the long term, for now Biggs says these discounts are helping keep Russian coal exports going, despite the high freight costs. She says that thanks to the historically high price of coal and the discounts Russia is offering, “it makes a lot of sense” for countries willing to import Russian coal to ship it – even from Western ports, paying the ocean freight cost all the way back to specific markets. “It’s quite a large cost to do that kind of shipment but at the moment, where prices are, it’s a drop in the bucket,” she adds.
In the immediate-to-mid-term, the situation for Russian coal exporters looks fairly stable. If they can continue offering discounted shipments there will likely be buyers, given coal prices are set to remain high for the foreseeable future. That pool may be drying up, though, with perhaps just China and India left, as customers decide to look elsewhere. Japan has banned Russian coal imports while utilities in South Korea and Taiwan are self-sanctioning by ending the use of Russian coal. Due to their longer forecast for coal generation and coal imports, says Biggs, this could be a problem for Russia. “If they decide to keep sanctions in place for longer, I think that’s going to hurt Russia.”
High grade, high risk For now, though, high market prices, discounted shipments and the scarcity of the high-grade – high- calorific and low-sulphuric value – coal that Russia supplies means we’ll continue to see it operating on the international markets. Even now, with huge swathes of
World Mining Frontiers /
www.nsenergybusiness.com
the populated world not even yet in the depths of winter, markets are desperate for high-grade coal, says Biggs. “Replacing Russian coal on the international market is a huge deal,” she adds. “And other suppliers – Australia, South Africa and Colombia – have all had no end of production issues this year. Australia is probably the biggest, because of flooding.” As the world faces an El Niño season, weather-related events are possible and there is the potential for some difficult days ahead. “If Europe has a colder than normal winter, or if Australia gets hit by a cyclone, we could really see coal prices go much higher than what we’ve ever seen before,” Biggs fears. And if the two combine – a supply side event in Australia, for example, and increased demand in Europe because of a harsh winter – there is real potential for a winter energy crisis.
Despite the EU turning its back on Russia and its coal, the industry in the country remains fairly sturdy for the time being.
“Right now, [Russia is] basically at the limits of capacity to move coal to the east.”
Biggs has one final warning for Europe, and for the energy sector more critically. She says the lack of being able to source suitable alternatives is already leading power plant operators to consider using lower-grade coal, a move she describes as “scary”. “Coal generators are actually looking at using metallurgical coal in order to make up for the loss; but metallurgical coal is really bad for burning, and for generators and boilers. […] They have to be desperate in order to use it,” she warns. For a world said to be moving away from coal, it says a lot from how the fossil fuel is still so easily weaponised by one side or another. What happens in the coming months is as uncertain today as it was the day Russian boots and bombs landed in Ukrainian territory. The hope is the lights don’t go out in Europe – either because of a lack of coal or failed power plants – and that peace can once again be found. Until then, coal will remain a source of power – literally and metaphorically. ●
15% BP 15
The percentage of global coal reserves that are controlled by Russia.
Andrzej Rostek/
Shutterstock.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37
