Jonathan Saul

LONDON, (Reuters) – European buyers increase coal shipments from around the world against the backdrop of a European Union proposal to ban Russian imports. This is in response to tight gas supplies and data sources.

The European Commission Tuesday recommended new sanctions to Moscow for its invading of Ukraine. This included an embargo on Russian coal buying and the ban on Russian vessels entering EU ports.

After the Kremlin demanded that Russian gazprom (MCX), be paid in roubles, the new restrictions came at a time when there is uncertainty over future Russian gas delivery to Europe.

European countries imported total of 7.1 million tonnes of heat-generating thermal coal in March. This is a 40.5% rise year-on-year. Analysis by shipbroker Braemar, ACM, was based on data from ships tracking.

Mark Nugent, Braemar dry bulk analyst, stated that although Russian coal exports to Europe were still at prewar levels in March of this year “the expected alteration to coal flows into Europe” has already begun.

The United States and Colombia sent strong ships to respond to Atlantic suppliers offering the best cost-effective alternative for European users.

According to the European Commission website about Russia, nearly 45% and 25% respectively of EU coal imports are dependent on Russia.

Braemar data indicated that 3.55 million tonnes (or 3.5 Mt) of Russian thermal coal had been imported into the EU during March. It was the most imports in a single month since Oct 2020.

Braemar reports that the March 28th-April 1 period saw the greatest Russian thermal coal imports on a weekly basis since Feb. 24, 2004, when there were 887,000 tonnes imported to the EU.

German coal importers’ association VDKi stated Wednesday that the country would be able, by peak demand winter season to import Russian hard coal alternatives. But there will be technical difficulties and high costs.

Braemar data indicated that Colombia’s thermal coal imports rose by 47.3% over the previous year to reach 1.3million tonnes in March.

In March, imports from the U.S. totalled 809 000 tonnes. This is a 30.3% increase year-on-year. It was also their highest point since October 2019.

South Africa saw an increase in imports in March with 287,000 tonnes of goods arriving, up from zero in March last year.

Braemar stated that Australia is also experiencing renewed interest in Europe’s thermal coal exports. They amounted to 537,000 tonnes of thermal coal in the first quarter, up from zero shipments in the same time period 2021.

However, Australia and Indonesia, two of the top exporters of coal, are now at their limits. They will not be able to supply Europe with additional coal if Russia is banned from its imports, said mining executives.

One shipping source who is familiar with the matter said that there is more concern about Russian coal trading (due to the broader sanctions). So, this is already having an effect on shipments.

Even though it’s still much more expensive than burning coal for power production, thermal has seen its price rise to all time highs.

Alex-Stuart Grumbar is a dry bulk analyst at MSI. He said that Europe’s desire to import coal from further afield will be a positive thing for larger, panamax-capesize shipping segments along long-haul coke trade routes.

Grunbar stated that “the initial disruption in trade patterns will prove positive for dry bulk market, but ultimately this will push global coal prices higher, encouraging China and India, to produce more domestically.”