Coal prices in northwest Europe jumped on Wednesday to their highest level in one month, after the European Commission proposed on Tuesday a ban on imports of Russian coal over Russian war crimes in Ukraine.
The benchmark European coal contract for delivery in 2023 jumped by 6.5 percent on Wednesday, to $230 per ton, while the front-month contract for May delivery surged by double digits, according to Bloomberg’s estimates. The May contract surged by 11 percent to $330 per ton.
This week’s renewed rally in European coal prices comes as the European Commission proposed on Tuesday a ban on imports of Russian coal in the European Union (EU), after footage continued to emerge of alleged war crimes committed by Russian troops withdrawing from Ukrainian towns.
The EU failed, however, to approve the measure on Wednesday, with outstanding technical issues still needing to be addressed. A new meeting is scheduled for Thursday.
The EU’s fifth package of sanctions against Russia, which the Commission proposed on Tuesday, includes an import ban on coal from Russia, worth $4.4 billion (4 billion euro) a year.
“Finally, it was high time to take this step. It is the first time that we directly sanction the import of fossil fuels from Russia, thus cutting an important revenue source,” European Commission President Ursula von der Leyen said in a speech on Wednesday.
“But now, we have to look into oil and we will have to look into the revenues that Russia gets from the fossil fuels. And we really have to make an effort, for example to take a share to an escrow account, so that we will really limit the source of revenues of Russia from fossil fuels. This has to end, and this is the next step we will have to take together,” von der Leyen added.
Europe will have to procure alternative supply from the United States, South Africa, Colombia, and even Australia, according to Morgan Stanley.
“Reconfiguring global trade flows in such a scenario would take time and raise costs,” Morgan Stanley said in a note carried by Bloomberg.
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