An old friend is better than two new ones: Asian countries increase coal imports
The war in the Middle East has caused an imbalance in the global gas market: prices have soared, and the availability of LNG for short-term contracts has sharply decreased. In response, importers were forced to make an unexpected move — to force purchases of coal. Moreover, even some countries that traditionally relied on clean fuels and considered coal to be the worst in terms of ecology went for it. Details can be found in the Izvestia article.
Demand has increased
Over the past week, Russian coal exports have risen in price by almost 10%, the highest level since 2024. This increase in cost stimulated strong demand from Asian importers. Now prices for high-calorie fuel of 6,000 kcal per 1 kg in Vostochny port have reached $106.2 per 1 ton.
South Korea is actively buying Russian coal, which is building up reserves before completing scheduled repairs at thermal power plants. In April, Russia increased exports to the country by 128.5% to 2.26 million tons, and now it accounts for a quarter of all coal supplies.
At the same time, coal of average caloric content — 5,500 kcal per 1 kg — in the Vostochny port at the end of May rose in price by 7.6%, reaching $96.2 per ton. This is a record price since May last year.
The reasons for what is happening
The rise in prices in Asia is explained by several reasons. Among them is the discussion of Indonesia's plans to nationalize coal exports. Jakarta is seeking to create a government agency, Danantara Sumber Daya Indonesia, which should receive data on counterparties and the necessary documentation from the first of this month. Starting next year, the country plans to become a single exporter.
In addition, an accident occurred at a mine in the Chinese province of Shanxi, after which the coal mining regions of China increased safety checks, which led to the suspension of enterprises. Experts do not rule out that in June the volume of production in China may decrease by 10-15 million tons, for the year — by 1-2% compared to 4.83 billion tons last year.
Recently, due to the instability of LNG supplies amid the Middle East crisis, the Asia-Pacific countries have been reorienting towards coal-fired generation. China and India need more electricity, and the authorities of these countries are afraid of power outages, so they rely on energy security and build new coal plants. Despite the harm to the environment, coal is chosen because of its relatively low cost and reliability.
One of the main reasons is the escalation in the Middle East and the subsequent blocking of the Strait of Hormuz, which have withdrawn about 20% of global LNG flows from the market. As a result, prices have jumped, and many have remembered the most affordable and reliable backup fuel — coal.
The situation has become especially painful for the Asian market, as LNG prices have doubled. However, countries have coal-fired power plants.
South Korea has now increased its purchases of coal from Russia by 1.9 times, Japan by 128.5%, and Taiwan by 44%. The countries of the region began to produce more electricity by burning coal. In South Korea, the figures reached their highest since 2019, rising by 39.7%, while Japan increased coal-fired generation by 11.1%.
Europe has changed its mind about giving up coal
In Europe, the abandonment of coal has been fixed at the legislative level and windmills, solar stations and gas terminals are being actively built. Asian countries are still relying on coal. In addition, their industry and electricity consumption are growing very fast, and they need a need that solar and wind energy cannot yet provide.
Some EU countries have completely abandoned the use of coal. Among them are Belgium, Austria, Sweden, Ireland and Portugal. Most EU countries have legislated plans to phase out coal, including Slovakia, Greece, France, Hungary, Italy, Denmark, the Netherlands, Finland, Spain, Romania, Slovenia, Croatia, the Czech Republic, Germany and Bulgaria.
However, Rome, which planned to abandon the use of coal back in 2025, has postponed the deadline by 13 years, and some closed thermal power plants there are ready to be deconservated. A similar position is held in Berlin.
According to Eurostat, seaborne imports of energy and coking coal to EU countries in January – April increased by 24% compared to the same period last year, reaching 14.1 million tons.
Experts believe that this does not mean a return to the days when everything worked on coal. Scientists have long recognized black fuel as one of the main culprits of global warming: it accounts for up to 40% of greenhouse emissions, and it pollutes the atmosphere twice as much as gas, with the same benefits for energy.
However, analysts believe that it is too early to abandon this resource. In the foreseeable future (for 5-10 years), coal will continue to be considered critically important.
Coal is cheaper and its price is more stable than gas. Therefore, for the authorities who do not want a sharp rise in the price of electricity for the population and factories, it remains an attractive option. And in those countries where there is coal and operating power plants, it will continue to be used even in conditions of transition to green energy.
As a result, Russia will receive more money from coal exports and gain a foothold in Asian markets, where more than 80% of this resource is now coming from the Russian Federation. High and stable demand will allow the development of ports, railways and the signing of new contracts with India, China and the countries of Southeast Asia.
However, Russian coal companies should not consider the current situation as the basis for a long-term strategy. This is only a temporary window of opportunity that needs to be used to modernize production and expand the geography of supplies.
The trend will continue
Ivan Petrov, a professor at the Faculty of Economics and Business of the Financial University under the Government of the Russian Federation, told Izvestia that the current situation would allow increasing the supply of Russian coal for export, primarily to Russia's traditional partners — China, India, South Korea and other Asia-Pacific countries, whose share in the total volume of Russian coal exports is about 80%..
"Russian coal companies have accumulated significant amounts of unrealized thermal coal, the export of which, in the face of rising world prices, can have a positive impact on the economy of coal mining enterprises," the expert explained.
The analyst also pointed out some problems. For example, the export of coal from the main coal region — Kuzbass — along the eastern corridor to the ports of the Far East or border crossings — Zabaikalsk, Grodekovo and Makhalino — is hampered by significant rail transportation costs.
— These trends are temporary, but the current geopolitical situation, which violates the energy security of a number of countries, requires a shift to anti-crisis energy resources, which include coal. At the same time, since February of this year, global prices for thermal coal have increased by 20% and are in the range of $130 to $145 per 1 ton, which has created a new price level and stable demand," the specialist said.
In his opinion, China, as Russia's main export partner, will meet the demand for imported coal due to a decrease in its own production due to additional measures to regulate coal mining due to recent accidents in the industry.
India, which is the second largest importer of Russian coal, plans to direct part of the extracted resource to coal chemistry, which will create an additional niche for high-quality Russian fuel. The Indian government is also planning investments in the development of the Russian coal industry.
— All countries with coal-fired power generation consider the resource as a reliable backup fuel, on the basis of which it is possible to quickly generate electricity in the required volumes. In addition, there are many more reliable routes for the supply of coal by land and sea than for gas and oil. And taking into account the population growth and the economies of the Asia—Pacific and African countries, the trend of stable demand for coal will continue for a long time," Petrov concluded.
Переведено сервисом «Яндекс Переводчик»
