The Coal Trader

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Coal extends 2-month high on supply jitters

European coal prices extended two-month highs in Tuesday trading amid rising gas prices and concerns that sanctions on Russian coal exports could reduce the global supply pool.

The front-month API 2 contract traded last up USD 0.90 to USD 111.50/t on Ice Futures. It earlier reached its highest since 5 January of USD 112.50/t.

“It’s a combination of factors, with gas being key, but also Suek partly playing a role,” said a head coal trader with a Swiss trading house, regarding recent US sanctions on major Russian coal exporter, Suek.

A coal trader with a German utility also said the Suek sanctions were “probably the main factor here”.

Although Russia-origin coal has been subject to an EU-wide ban since August 2022 – in response to the war in Ukraine – the new US sanctions could see other buyers, such as Turkey and India, shunning the material to avoid incurring secondary sanctions. This risked tightening global supply, as buyers in Europe and Asia vied for alternative non-Russian coal.

“Even in Turkey, people are starting to take less and less [Russian coal], probably due to the new sanction issues,” said a trader with a European coal-trading firm. Turkey imported an estimated 1.8m tonnes of coal from Russia last month, down from 1.9m tonnes in January and 2.3m tonnes in December, according to DBX estimates. 

“I think if we now had [more] Russian coal, the price would probably be back to USD 50-60/t,” he said, noting logistical constraints on the Russian rail system – amid heightened usage for war-related purposes – had also impacted the country’s export volumes. Russia exported around 11.7m tonnes in February, down from 14m tonnes in the same month last year, DBX data showed.

Gas link
But coal was also moving in tandem with competing gas prices, which climbed to a near one-month high in the current session, partially on the back of short-covering. The front-month Dutch TTF gas contract was seen last up EUR 0.63 at EUR 27.52/MWh on Ice Endex. Earlier, it touched the highest since 7 February of EUR 28.72/MWh.

Carbon prices meanwhile gained ground in line with the related fuels markets. The benchmark Dec 24 EUA contract was last seen EUR 3.57 higher at EUR 60.60/t on Ice Endex. It hit a near one-month high of USD 61.39/t earlier in the session.

Reporting by: Laurence Walker