EU agrees to adopt fifth sanctions package, including ban on Russian coal imports

The European Council has agreed to adopt the fifth package of sanctions against Russia, including banning imports of coal, the European Commission announced April 8.

The coal ban is one of six elements of the sanctions package and will apply to all forms of Russian coal, namely metallurgical and thermal coal.

The EC said the ban would affect a fourth of all Russian coal exports and amount to around Eur8 billion ($8.7 billion)/year loss of revenue for Russia.

"The EU imports around 50 million mt/year of Russian coal, mainly good quality steam coal for power generation, but also some coking coal and anthracite," Euracoal Secretary-General Brian Ricketts told S&P Global Commodity Insights.

According to Eurostat data, the EU imported coal worth Eur 5.2 billion in 2021, of which Eur 329 million was for coking coal and Eur4.4 billion for thermal coal, while the remainder was for anthracite.

According to Russian Federal Customs Service statistics, Russia exported almost 3.4 million mt of coking coal to the EU in 2021, under 5% of the country's coking coal output estimated by miner Mechel at 88 million-98 million mt/year, while exports of steam coal and anthracite amounted to 45 million mt.

"To find alternative supplies will be difficult, but not impossible as the global coal market is well supplied and diversified," Ricketts said.

"That said, Russian coal is of a good quality -- low ash, low sulfur and OK NOx emissions -- so some compromises would have to be made by coal purchasers," he added.

Ricketts provided two scenarios, one to replace current Russian coal imports, which would require 50 million mt extra coal, and a second to generate more than 120 TWh from coal plants to displace 22 bcm of Russian gas, as suggested by the IEA, which would require a total additional 100 million mt of coal.

Euracoal proposed that 25 million mt would have to come from the US in both scenarios, while 13 million mt would have to come from Australia in the first scenario and 28 million mt in the second.

Additional coal would also have to come from Indonesia (5 million mt in the first scenario, 10 million mt in the second), Colombia (2 million mt and 21 million mt, respectively) and South Africa (4 million mt and 14 million mt, respectively), according to Euracoal.

"Global coal flows will change with longer transport distances. India and others will struggle to pay the higher prices, we already see coastal plants idled in India and Safi in Morocco unable to secure coal," Ricketts said.

"There are no good outcomes here and we will all be poorer," he added.

Platts assessed the CIF ARA 6,000 kcal/kg NAR 15-60 day daily price at $290.05/mt April 7, down $15/mt day on day but up 114.8% since the start of 2022, according to S&P Global data.

The EU is not the only region imposing a ban on Russian coal, with the Group of Seven nations, or G7 -- which includes the US, Canada, the UK, Japan, Germany, France and Italy -- announcing April 6 that they would all be "phasing out and banning Russian coal imports."

The UK said April 6 that it was planning to end all dependency on Russian coal and oil by the end of 2022 and end imports of gas as soon as possible. Japan's Prime Minister Fumio Kishida said April 8 that Japan would also be reducing coal imports in phases and was looking to quickly secure alternative solutions.