Russian coal burns out in Europe

Deliveries of Russian coal to Europe in August, when the coal embargo came into force, fell by 77% in monthly terms, to 1.3 million tons. To replace Russian coal, European consumers have multiplied fuel imports from South Africa and Colombia, which are more expensive than supplies from Russia. Experts also note that coal from South Africa contains more sulfur, which negatively affects the environmental situation near coal plants.

Russia delivered 1.3 million tons of coal to Europe in August, which is 77% less than in July, and almost three times less than a year ago, follows from the latest Eurostat data, which Kommersant has read. In August, Europe purchased Russian coal in monetary terms for €374 million, which is almost two times less than in July. However, in annual terms, due to growth in delivery prices, they fell by only 23%.

The EU embargo on the purchase of coal from Russia, adopted in the spring, came into force on August 10, until this date Russian and European companies could complete contracts concluded before April. Instead of Europe, Russian coal companies have increased supplies to China and India, follows from the customs statistics of the countries. Thus, imports to China in August amounted to 8.5 million tons, reaching a five-year record. Beijing bought $1.4 billion worth of coal, double the August 2021 figure. Imports to India doubled in monthly terms, to 2.6 million tons of coal for $550 million. In value terms, deliveries almost tripled.

Russia’s withdrawal from the European market allowed South Africa and Colombia to increase supplies.

The African country increased exports to Europe by 3.4 times, to 1.6 million tons, while Colombia doubled, to 1.4 million tons. At the same time, with deliveries comparable to Russia in August, the cost of South African and Colombian imports is higher – € 543 million and € 506 million, respectively.

At the end of 2022, coal production in Russia and its export will decrease. The Ministry of Energy expects a 1% decrease in production, TASS reported on October 12, citing the head of the ministry, Nikolai Shulginov. This assessment is more optimistic than that of the Ministry of Economy: the ministry has included in the forecast of the socio-economic development of the Russian Federation a drop in production by 4.2%. Exports will begin to recover from 2024, Deputy Energy Minister Sergei Mochalnikov said. According to him, 2023 will be spent on the formation of new logistics routes: after the European embargo and the cessation of deliveries to Ukraine, about a third of Russian coal exports, new sales markets are needed.

Kuzbassrazrezugol CEO Elena Drobina said on October 7 that after the EU embargo was introduced in August, the number of countries where the company supplies coal has dropped to 20 from 35 in 2021. But last year’s sales could be achieved in 2023 by solving a number of problems, including export to the Far East, she believes. Over the seven months of this year, the drop in exports amounted to 8.6%, but it was largely offset by increased demand in the domestic market, Deputy Prime Minister Alexander Novak wrote in the October column of the Energy Policy magazine.

Coal in Europe remains quite expensive even after some stabilization in prices due to lower gas prices in September, says NRA’s Sergey Grishunin.

Now thermal coal in North-Western Europe costs about $300 per ton, and prices in the ports of South Africa for the most popular brands are at the level of $255 per ton, while Russian coal is sold in China with a 40% discount – for $130 per ton. Based on current prices, the expert estimates that abandoning Russian coal will cost the EU $8.5 billion a year.

Sergey Grishunin also notes that the sulfur content in African coal sometimes reaches 2% versus 0.3–0.4% for Kuzbass coal. He emphasizes that the increase in the formation of sulfur oxides during the combustion of such coal has a negative impact on the environmental situation in the area of ​​coal-fired power plants.

Evgeny Zainullin