Russian thermal coal exports to Europe could potentially drop 45% this year as buyers shy away from supplies following the country’s invasion of Ukraine, an analyst with analysis firm McCloskey said on Monday. Exports – including seaborne and rail shipments – were likely to decline 21m tonnes to 26m tonnes, as market participants took steps to seek alternative material, said Sareena Patel, research and analysis manager for thermal coal, at a Coaltrans conference in Athens. “The situation remains uncertain,” Patel said, noting there remained a “high risk” of Russian exports being “drastically cut”. However, she noted the likely drop was significantly lower than initial expectations. “Sanctions put in place were not as impactful as we initially thought they would be,” she said. But she said European buyers – who continued to receive Russian supply – would take less as contracts with Russian suppliers began to expire towards the end of the year. As such, there could be a further decline in exports from Russia to Europe next year.
Import gains
Nevertheless, Patel said total thermal coal imports to Europe could still rise marginally this year, with potential increases in deliveries of 17m tonnes from South Africa and 5m tonnes from Colombia. And Russia could raise shipments to non-European consumers. “There will be much less [Russian coal] to Europe, but India and China will continue to consume Russian coal,” she said. Fears of a sudden shortfall in Russian supply to Europe – which generally meets around 60-70% of the region’s import requirements – triggered a sharp rise in prices, with the API 2 front-quarter contract spiking to a record USD 500/t in early March. The contract has since retreated to around USD 242/t, on Ice Futures.