Sanctions Against Russia Over Ukraine Prompt Coal Prices to Skyrocket

© Sputnik / Alexander Patrin / Go to the photo bankCoal mining in Kemerovo region, Russia
Coal mining in Kemerovo region, Russia - Sputnik International, 1920, 03.03.2022
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Following the start of the special operation in Ukraine, nations in the West imposed extensive sanctions on the Russian economy and froze the Nord Stream 2 project – prompting gas prices to set new record highs. But apparently, even coal won't be able to substitute for expensive fuel.
Global coal prices have been rapidly rising since the start of the special operation in Ukraine and the introduction of western sanctions against Russia as customers in Asia are trying to find other sources of fuel not associated with the risk of sanctions.
CEO of Australia's Yancoal, David Moult, said his Asian customers are scrambling to find alternative sources of coal and this panic has driven the prices up. Coal prices were growing prior to the start of the operation in Ukraine, but following its launch, the market price for coal reached $400 per tonne (as of 2 March) after a long period of lingering around $150 per tonne, the price statistics website Trading Economies showed.

"I would expect energy prices would continue to rise with that sort of conflict underway, the knock-on effect for us is the fact there are countries that would normally buy Russian coal that won't buy Russian coal at the moment", David Moult said.

Prices have also been driven up by other energy sources, like oil and gas – a common alternative to coal – also skyrocketing. An additional problem is that some customers relied on a specific brand and quality of Russian coal. And the latter satisfied significant chunks of the market, namely in Europe, commodity market analyst Wood Mackenzie pointed out.

"Having to replace Russian coal volumes would result in a price shock to global coal markets and a coal shortage in Europe. Russian coal accounts for roughly 30 percent of European metallurgical [coking] coal imports and over 60 percent of European thermal coal imports", Mackenzie said.

High coal prices, in turn, have resulted in a decline in purchases of the resource in Asia, according to the firm Refinitiv. Per its records, the amount of coal shipped by sea to Asian countries has reached its lowest point since February 2021. Refinitiv said China imported 46% less coal in the first two months of 2022 compared to the same period in 2021.
The price hike for energy resources takes place amid growing concerns about possible disruptions in supplies to the market in light of the Russian special operation in Ukraine and ensuing sanctions. Western nations called the operation an "invasion" and slapped Russian banks and numerous companies with economic measures. Moscow rejected their claims, saying that it has no plans to seize Ukraine and only wants to demilitarise and "de-Nazify" the country to eliminate the threat it posed to Russia.
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