European Coal Jumps to 1-Month High on Plan to Curb Russian Fuel

(Bloomberg) -- Northwest European coal futures rose to their highest in a month as a proposed ban on imports from Russia is poised to make the global market much tighter.

European utilities and traders will most likely boost imports from South Africa, Colombia the U.S. and even Australia, Morgan Stanley said in a note. “Reconfiguring global trade flows in such a scenario would take time and raise costs,” the bank said.

The European Union, as well as the U.K., are looking at ways to cut their dependence on Russian energy supplies because of the war in Ukraine. With the bloc also seeking to curb gas imports from its top supplier, the move will likely increase the pressure on coal supplies from other exporters.

Europe's Russia Coal Ban to Fuel Global Fight for Dirty Fuel

“To find alternative supplies will be difficult, but not impossible,” said Brian Ricketts, secretary general of the Euracoal lobby group in Brussels.

Benchmark European contract for next year coal delivery rose for a third day, adding 6.5% to 230 dollars per ton. The May contract advanced as much as 11% to 330 dollars on ICE Futures Europe. With carbon and gas prices also rising, next year power in Germany added as much as 2.2% to 189 euros per megawatt-hour, as higher fuel prices are poised to boost the cost of generating electricity.

But even after the latest rally, profitability for generating power at a German coal plant remains significantly higher than at a gas plant, according to Spark and dark spreads, a theoretical measure of the margin.