The Russian-Ukrainian conflict exacerbates supply problems in the coal market.

This year's February began a complete change of power system throughout the international coal market. While the market has not yet recovered its losses from the pandemic crisis, the Russian-Ukrainian conflict is exacerbating supply problems – according to the development of the Industrial Development Agency.

"Russian coal, which has so far met the needs of both Asian-Pacific and Atlantic customers, has been almost completely driven out of the international coal market and, worse, the possibility of replacing it with another equivalent in terms of both tonnage and quality, is at present unlikely" - indicated in a monthly summary of press publications on the global coal market published by the Katowice branch of the ARP in February this year.

As highlighted, although Russian power coal producers did not find themselves on the list of sanctions announced at the end of February imposed by the United States, the European Union or the United Kingdom, most buyers were afraid of obtaining Russian-origin cargo, regardless of their availability.

Furthermore, less than two weeks earlier, the Russian producer Kuzbassrazrezugol announced a higher power in coal supply, as the limited capacity of the railways led to a collapse of supplies to the northwest ports of Russia. Turkish customers also halted Russian coal purchases until sanctions and other potential retaliatory actions against Russia were clarified.

The ARP reserves that tensions between Russia and Ukraine appear at a time when the availability of spot loads from other sources, including Colombia, the USA, Australia and South Africa, remains very limited. This means that buyers in north-western Europe and the wider Mediterranean region and recipients from the North-East Asia market, including mainly Japan, will find it difficult to replace, or to replace, supply disruptions from Russia.

"The enormous uncertainty in the market and the lack of alternatives to Russian volumes have caused prices to reach unlisted levels throughout the month", the publication stressed. The three most important price benchmarkes for coal-energy were cited from the last week's February listing: NEWC in Australia $256.18 per tonne, RB in South Africa $195 per tonne and DES ARA (Amsterdam, Rotterdam and Antwerp) – $232 per tonne.

Price increases were accompanied by low stock in key terminals. In the last week of the month, the coal reserves in the RB coal terminal decreased by 13 percent to 2.1 million tonnes and were 44 percent lower than in the same period in 2021. In the European ARA handling centre, stocks reached another low level of 2.6 million tonnes on 20 February.

"As a result of such unexpected events on the international coal market in recent months, which... include the Covid-19 epidemic, the ban on imports of Australian coal into China, the cessation of exports of Indonesian raw material and the current difficulties in obtaining Russian raw material..., the key question remains the direction in which the world's raw materials policy will be pursued, taking into account the global trend of carbon-based energy for clean energy sources," the experts of the Katowice branch of the ARP admit.

Emphasising that the coal sector accounts for almost half of global greenhouse gas emissions, they recall that more than 40 countries have committed themselves to stop using coal after the November climate negotiations in Glasgow (largest consumers, such as China, India and the USA, have not made such a commitment).

Autorzy opracowania zaznaczają, że po tym, jak Chiny i grupa G20 zaprzestały wspierania nowych projektów za granicą, prawie wszystkie międzynarodowe środki finansowe na rzecz rozwoju są obecnie zobowiązane do ograniczenia lub zaprzestania inwestycji w elektrownie węglowe. „Mimo iż, jak się okazuje, węgiel pozostaje tanim i niezwodnym paliwem, możliwości powrotu do energetyki opartej na węglu pozostają niewielkie” – diagnozuje ARP.

Autor: Mateusz Babak/PAP