Coal Briquettes Import By Ukraine may fall due to Coal's Supply Crisis in China - A possibility?

Updated: 22-Apr-2022
Coal Briquettes Import By Ukraine may fall due to Coal's Supply Crisis in China - A possibility?

Russia's incursion of Ukraine, as well as the unprecedented economic sanctions that have followed, have thrown the global energy market into disarray, sending fossil fuel prices skyrocketing and raising questions in many countries about whether climate ambitions must be scaled back to keep the lights on.
Though Western sanctions have not yet directly targeted Russian oil, coal, or gas, the European Union has announced plans to end its energy reliance on Russia, while companies around the world are looking for suppliers elsewhere, wary of the reputational and financial risks now associated with the country.
German Chancellor Olaf Scholz has rejected requests from certain EU member states to broaden sanctions and embargo all Russian energy, warning the Bundestag on Wednesday that such actions would "throw our nation and all of Europe into recession."
However, he stated that the EU is already diversifying its fossil fuel sources. Europe is especially reliant on imported energy from Russia, which supplies 45 percent of its coal, 40 percent of its gas, and 25 percent of its oil.
The 27-nation EU has vowed to cut greenhouse gas emissions by 55% by 2030, compared to 1990 levels, and to reach net-zero emissions by 2050.
Given the continent's absence of liquid natural gas infrastructure, coal looks to be an apparent short-term solution to the continent's energy dilemma. France has temporarily enabled power stations to burn additional coal, Italy has raised the prospect of reactivating decommissioned coal facilities, and Germany has announced plans to develop coal reserves and signaled that its coal phase-out date may be postponed.
"This is a little bit of a stress test for how nations have been handling energy transition," said Pieter de Pous, climate, and energy policy adviser at climate change research tank E3G.
"Countries that did this correctly, eschewing gas as a bridge fuel alternative, are in a better position than those that truly counted on gas to move off coal."
Russia is the third-largest supplier of thermal coal, which is mostly utilized for power production. Other major suppliers, like Australia and South Africa, are already seeing rising demand from both Asian and European markets, significantly outstripping existing supplies.
The price of coal futures at Australia's Newcastle port, a crucial benchmark for the world's largest Asian market, was $325 per tonne on Wednesday, down from a high of $441 earlier this month but still more than double where it was at the start of the year.
Meanwhile, large coal miners such as Glencore, Sasol, and Peabody Energy have nearly quadrupled in value since January.
Coal consumption was already rising through 2021 as gas prices soared, an effect exacerbated by the Ukraine crisis.
Several variables, according to a BloombergNEF briefing paper, are fueling coal's dizzying price climb. On the demand side, Europe's increased hunger comes at a time when coal consumption in Asia is increasing as countries recover from the epidemic.
It also noted several supply constraints in coal-producing nations, including floods in mining districts in Australia, export limits in Indonesia to address internal shortages, and a spate of mining accidents in China.
"There is just an almost total lack of surplus thermal coal accessible globally," Steve Hulton, vice president of coal at Rystad Energy, stated earlier this month.
While coal's sudden increase in popularity will generate significant revenues for firms still involved in the industry, analysts told Al Jazeera that it is unlikely to reverse coal's long-term costliness and attractiveness in the US and the EU.
"There may be some cases where European countries are forced into a short-term climate Faustian bargain, temporarily increasing coal use as a last resort in exchange for a faster phase-out of fossil gas, particularly Russian fossil gas," said Tim Gore, head of the Institute for European Environmental Policy's Low Carbon and Circular Economy program (IEEP).
The crisis has shown the perils of depending on gas as a transition fuel, and it has demonstrated that rapid development of renewables and improvements in energy efficiency are the greatest paths to meeting the EU's net-zero targets, according to Gore.
India, the world's second-largest coal consumer, has also announced plans to increase local output to reduce its dependency on imports. Coal India, the state-owned company, has set a target of 670 million tonnes for this fiscal year.
State and institutional investors are abandoning coal to achieve greener portfolios and net-zero targets, which means that the cost of borrowing to fund new machinery or infrastructure at coal mines and plants has risen significantly over the last decade, while the cost of funding renewables has decreased.
According to one survey, 80 percent of coal facilities in the United States either cost more to run than wind or solar plants or are planned for a shutdown.
"In most countries, renewables are still the cheapest source of additional capacity... those underlying fundamentals haven't altered," de Pous told Al Jazeera. "They will continue to imply that is the direction of travel."


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