European coal, German power prices rise on phased-in Russian coal embargo

European coal and German forward power prices rose further April 8 after the EU adopted an import ban on all forms of Russian coal to be phased in over the next four months, German energy minister Robert Habeck said.

The German year-ahead baseload traded as high as Eur197.75/MWh, a new high for the 2023 contract, while year-ahead coal into Europe traded at $230/mt, EEX and ICE exchange data showed.

"This affects one fourth of all Russian coal exports, amounting to around Eur8 billion loss of revenue per year for Russia," the European Commission said in statement with further details expected during the day.

Russia accounts for over half of European thermal coal imports with Germany the most impacted, having imported some 18.2 million mt of thermal coal in 2021.

S&P Global Commodity Insights assessed Platts CIF ARA year-ahead coal into Europe at $216/mt at the market close April 7.

Platts CIF ARA prompt-month coal into Europe already rose 17% to a $301/mt at the market close April 5 when the EC first proposed the Russian coal embargo.

German coal importers

Germany's coal importers association VdKi said April 8 that a well-functioning global market will allow German buyers to replace Russian cargoes, with Germany's Russian import demand accounting for only 2% of the global seaborne coal market.

The association, however, warned of technical challenges and rising prices in the near term, presenting the results of a survey amongst its members with a majority seeing "sufficient" supply for the next winter.

"Until next winter it should be possible to be completely without Russian coal," VdKi board member and head of trading at German hard-coal power plant operator Steag Stephan Riezler said.

Some German coal plants may also have technical issues changing to a different coal quality, VdKi head Alexander Bethe added.

"Ultimately we will master these challenges," Bethe added.

Germany's government has announced a national coal reserve, but little details have emerged so far about its design with 84% of VdKi members preferring a decentralized coal reserve.

Hard-coal fired power generation accounted for around 10% of German power demand in 2021, generating some 49.5 TWh.

Berlin plans to boost coal burn near term to reduce gas-for-power demand and as Germany is to shut its final reactors.