Coal news and updates

European Union’s stability in energy supply to come from coal in near term: ANZ

With the likelihood of a halt to Russian gas flows increasing and limited alternatives in the short term, energy rationing is likely to ensue, leaving EU with coal as the only option for stabilising its energy supply, Australia and New Zealand Banking Group said in a report July 14.

Nuclear remains curtailed because of aging power stations, and LNG imports are at maximum capacity,” ANZ said, adding Europe has been scrambling to diversify sources, but alternatives are increasingly difficult to find.
Global thermal coal prices have remained elevated because of the Russia-Ukraine conflict, disrupting trade flows amid additional demand from Europe, which has been gradually cutting its reliance on Russian fossil fuels.
With EU sanctions on Russia, the flow of energy commodities, especially gas has been a major cause of concern for the region. The EU imports 90% of its gas consumption, with Russia providing around 45% of those imports, at varying levels across member states.

Meanwhile, Germany is already looking at restarting some coal-fired power stations. It has earmarked 6.9 GW of coal, 1.9 GW of lignite and 1.6 GW of oil capacity to boost its energy supplies. Parliament has also discussed financial incentives to coal-fired power operators if the gas supply situation deteriorates, ANZ said.

Italy is also considering the revival of up to 2.5 GW of coal-fired power generation capacity to limit gas consumption, the report said, adding this would bring Italy’s operational coal capacity up to 8.5 GW.

If Nord Stream continues at around 40% of capacity for the rest of the year, ANZ said gas consumption would have to fall by 5%, and storage levels would reach about 67% ahead of winter. “If Nord Stream halts completely, gas consumption would need to be cut by 10% and storage levels would reach 60% by winter. There is, therefore, a real risk that Europe could run out of gas during winters.”

Prices to remain elevated

Coal prices continue to face upward pressure from strong European demand. European CIF ARA 6,000 kcal/kg NAR physical coal prices were assessed at $415/mt July 13, still in the range of record highs, S&P Global Commodity Insights data showed.

Prices had been holding close to the $400/mt level since the news that more coal plants would be bought back from retirement in Europe in a response to ongoing natural gas supply issues. The initial short-term demand caused by this, coupled with a heatwave across most of continental Europe had pushed prices to record levels at the end of June.

“An impending energy crisis in Europe is likely to switch power utilities from gas to coal, this could increase competition for seaborne coal,” ANZ said.

South Africa has increased thermal coal exports to Europe, but infrastructure will limit how much further that can rise. Colombian coal exports are limited by mine production constraints, while most Australian coal is under contract, ANZ said, adding even if some flow continues through Nord Stream, electricity prices will be high.

“Russian energy has been relatively cheap, ranging from $2.6/mmBtu to $4.6/mmBtu. LNG is more expensive, with the current spot price for North Asia LNG around $40/mmBtu; and coal prices are likely to rise as demand increases.”