The ban on the supply of Russian coal to the European Union came into force On August 10, the European Union began to operate a ban on the import of coal from Russia. Russian companies have already redirected supplies to India and Turkey, and Europeans have begun to buy raw materials in Colombia, Australia and South Africa 756589908906852.jpg 673w” media=”(max-width: 320px) and (-webkit-min-device-pixel-ratio: 2), (max-width: 320px) and (min-resolution: 192dpi)” >
In April, the European Union announced a ban on the purchase, import or transit transportation of Russian coal and other solid fossil fuels under the fifth sanctions package. On August 10, the ban came into force, before that, the parties were allowed to fulfill contracts concluded before April 9.
According to the European Commission, the embargo will affect 25% of all Russian coal exports worth €8 billion a year.
According to the Ministry of Energy, coal exports from Russia to the EU countries in 2021 amounted to 48.75 million tons (22 .6% of total exports). The vast majority was thermal coal, which is used to generate heat and electricity,— 45.3 million tons. Another 3.45 million tons— to coking, necessary for steel production.
According to BCS Global Markets, before the start of the military special operation in Ukraine, Russia provided 70% of the EU's needs for energy coal.
Where did Russia redirect the coal?
The Russian authorities have not published information about exports since spring. However, according to foreign industry agencies, after the EU announced an embargo on Russian coal, India and Turkey became one of its largest buyers, and, according to them, supplies to these countries are growing every month.
In May 2022, Russia increased coal supplies to India by 25% compared to May 2021, up to 836 thousand tons, and in June— 1.7 times, up to 1.16 million tons, according to Reuters data, citing Kpler, an agency for collecting information on commodity markets. According to the Indian industry online resource Coamint, in July Russia exported 2.06 million tons of coal to India and moved from sixth to third place among the largest suppliers in the country.
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According to the UN foreign trade base Comtrade, coal imports from Russia to Turkey in May increased by 11% compared to May last year, to 1.03 million tons, and in June&mdash ; by 5%, to 1.73 million tons.
Where else is Russian coal banned
In response to the start of a special operation in Ukraine, US President Joe Biden signed a decree in early March banning the import of Russian energy resources, including coal. In April, Japan and Switzerland announced an embargo. In July, the United Kingdom announced a similar ban. However, deliveries of Russian coal to most of these countries were incomparable in terms of volumes with deliveries to the European Union. Of these, only Japan is a major buyer, which imported in 2021, according to the Comtrade database, 19.8 million tons worth $2.58 billion.
What problems arose during the reorientation of exports
One of the main difficulties in reorienting Russian coal to the east— discounts of up to 30% from current prices, especially for Indian contracts, says Sergey Grishunin, managing director of the NRA rating service. According to the NKR rating agency, Russian coal is now sold on the world market with a discount of up to 50%.
Deliveries to Europe were much more profitable: in the EU, the price of steam coal with delivery is about $330 per ton, in China— $170 per ton (NRA data). Nevertheless, current coal prices and low production costs still allow Russian coal miners to remain profitable, according to the NKR study. The annual report of the largest Russian coal company SUEK states that the cost of coal in 2020-2021 was $14 per ton.
Another difficulty in export reorientation— lack of loading capacity. In early April, Deputy Prime Minister Alexander Novak said that it was possible to deliver to Asia not only through Primorye, which is difficult to reach due to limited transport capacity on the railroad, but also through ports with free capacities on the Black and Baltic Seas. But rising freight costs and insurance make transportation on these routes low-margin, Grishunin warns.
RBC sent inquiries to the press service of SUEK, as well as other major producers of thermal coal— Kuzbassrazrezugol, Kuzbass Fuel Company and SDS-Coal.
How the EU has bought coal in recent months
According to Eurostat, more than 85% of the coal products from Russia (by weight) that were subject to sanctions in 2021 fell into the category “hard coal, briquettes, pellets and similar types of solid fuels derived from hard coal”, which includes both energy , and coking coal.
In May—June 2022, the largest European importers of Russian coal— Netherlands, Germany, Italy— increased purchases of these goods from Russia on the eve of the embargo by 22.6%, to almost 5 million tons. Spain increased them by 2.4 times over the same period, to 0.59 million tons, Belgium— twice, up to 0.57 million tons.
However, according to transport broker Braemar, in June total coal imports from Russia to the EU were 2.3 million tons, the lowest in the previous 12 months. Data for July has not yet been published.
How the EU is replacing Russian coal
“Current events (Russia's special military operation in Ukraine and subsequent sanctions.— RBC) will change the balance of power in the import of coal to Europe, since many of Russia's competitors used to find it difficult to work in conditions of low prices and low demand, — says the European Commission's quarterly report on European electricity markets.
For a long time, the United States, Canada, Australia, Colombia and South Africa were major coal suppliers to Europe. Then they were forced out by supplies of cheap and high-quality coal from Russia, Grishunin explains. According to him, now, taking into account the rise in prices in the EU, all the “old” suppliers will return to this market.
According to Braemar, EU coal imports from Colombia quadrupled in June to 1.2 million tons. Australian coal shipments reached 1.1 million tons, the highest ever. Exports from the United States grew by 27.9% to 618 thousand tons. South Africa sent 854 thousand tons to Europe, a year earlier it was not on this market at all. The European Union also began to increase imports from Kazakhstan, Kommersant reported. After the start of Russian hostilities in Ukraine, deliveries from this country reached 300–400 thousand tons per month, although a year earlier they left only 60–70 thousand tons.
But Europe needs to replace not only Russian coal, but and gas. At the end of July, the head of the European Commission, Ursula von der Leyen, said that Moscow had stopped supplying it to 12 EU countries, and did not rule out a complete cessation of Russian gas exports. Against the background of the blocking of its foreign exchange reserves by the West, Russia introduced a new payment scheme for gas with conversion into rubles in the spring and stopped supplying it to buyers who refused to switch to it. According to ING bank analysts, next year the EU and the UK will need to increase coal imports by 43% to cover energy fuel needs.
Additional coal needs in Europe will amount to about 35-45 million tons, calculated by the NRA . According to Grishunin, it will be possible to quickly acquire such volumes only if the use of low-grade thermal coal from Indonesia or brown coal from the United States is expanded.
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