June sees historically high levels of coal indices in western European ports
In June, indices showing thermal coal prices at Western European ports reached a historic high of $424.18 per tonne, according to a study by the Industrial Development Agency. In the international market, June was another month of looking for alternatives to raw materials from Russia.
– June was another month of global importers struggling for alternatives to Russian energy raw materials. The entire international coal market is plunged into a purchasing panic and efforts to diversify supplies, and individual producers are moving away from the large-scale decarbonisation implemented so far, focusing on rebuilding their own resource base – indicated in the monthly summary of press publications concerning the world coal market, published by the Katowice branch of the Industrial Development Agency.
– The situation was particularly tense in the area of the European market, where the approaching date of 10 August – which is the deadline after which coal imports from Russia will be completely stopped – translated into historically high levels of the CIF ARA (Amsterdam, Rotterdam, Antwerp) indices,” the study reads.
According to experts, the supply of coal in north-western Europe has increased over the past weeks, thanks to significant supplies and low seasonal power generation at coal-fired power plants. In early June, coal stocks at ARA ports rose to 5.8 million tonnes, exceeding the five-year average for the first time in two years.
– A huge influx of previously contracted Russian raw material contributed to this high level of stocks. Thus, Russian seaborne thermal coal exports reached a record high in May, experts report.
The increase in European coal stocks should help fuel increased power generation from this raw material in north-western Europe in the near term, the study estimated.
Initially, the influx of imported coal partially dampened the value of European CIF ARA prices, which fell from a record high of US$416.75 per tonne (recorded on 9 March this year). On 23 June, however, the index reached a new historic high of US$424.18 per tonne for thermal coal of specified parameters.
– The index has never recorded such a record high, the study reads.
As the experts point out, “the panic over the suspension of Russian gas supplies via the Nord Stream pipeline at the beginning of June and rising oil prices have caused most European countries to focus on intensive preparations of their coal-fired power plants to ensure energy security in the face of disruptions in gas supplies from Russia, particularly anticipated during the winter period”.
Among others, the German Ministry of Economic Affairs announced that the return of coal-fired power plants could increase energy production capacity by 10 GWh if gas supplies become “critical”. The governments of Italy, the Netherlands and the UK have also taken steps to ensure the availability of coal-fired power plants in the coming months if they need to operate at high capacity.
The Austrian government – as noted – has agreed with one energy company that a gas-fired plant will be replaced by a coal-fired one if necessary. The Netherlands intends to lift the production cap for coal-fired power plants to save gas. The UK government is determined to run three power stations in the winter, which burn mainly biomass but can also use coal if necessary, the IDA reported.
There was also a marked increase in demand for Australian coal grades, mainly high calorific value, at the end of June as European buyers became increasingly interested. The key NEWC index for this market, like the European CIF ARA index, crossed the $400/tonne barrier, reaching $403.44/tonne on 24 June.
Experts point out that while energy producers in Europe are taking every measure to maintain sanctions on energy imports in response to the Russian invasion of Ukraine, Asian countries such as China and India are currently benefiting from cheaper supplies of coal, gas or oil from Russia.