Following the European Union's (EU) decision to embargo Russian coal, eyes are turned to major coal exporters such as Indonesia, Australia, the USA, South Africa and Colombia, while the exports of these countries to the continent may be insufficient to provide an alternative to Russia.
According to the information on the website of the European Commission, the EU's dependence on Russia in coal imports is at the level of 45 percent.
Brussels-based think tank Bruegel calculates that this dependency ratio is 70 percent for thermal coal used in electricity generation. It is stated that this situation will cause electricity prices to rise due to the embargo decision in the EU, which provides 15 percent of its electricity production from coal.
Although coal production in the EU has decreased within the scope of climate change targets in recent years, coal imported from Russia mainly filled the gap created due to the fact that consumption did not decrease at the same pace.
Although South Africa and the USA had the largest share in EU coal imports in the 1990s, the decline in imports from these countries was replaced by Russia over the years and the country became one of the continent's largest coal suppliers.
According to the data compiled by AA correspondent from the US Energy Information Administration (EIA), Russia exported 262 million tons of coal last year, which increased by 7 percent compared to the previous year. China was the largest buyer of Russian coal on a country basis with 62.8 million tons.
69 million tons of Russia's total coal exports were made to EU countries.
Among EU countries, Germany received the most coal from Russia with 22.3 million tons in 2021. This was followed by the Netherlands with 15.8 million tons, Poland with 9.1 million tons and Italy with 5.8 million tons.
- Supply constraints and record prices prevail in the market
Although there are alternative sources to the coal that the EU buys from Russia, it is predicted that the cost of replacing Russian coal with a different source will be high due to the supply tightness and high prices in the market.
According to the International Energy Agency's (IEA) Coal 2021 report, global coal supply is calculated to be around 7.9 billion tons last year. China, which ranks first in production with 3.9 billion tons, is followed by India with 793 million tons, Indonesia with 576 million tons and Australia with 470 million tons among Asian countries.
It is calculated that the USA produces 528 million tons of coal, the EU 329 million tons and Russia 429 million tons of coal.
Russia is one of the countries with the highest increase in coal production
Although its production is high, India's coal production, which does not have a large share in coal exports, is expected to increase by 163 million tons until 2024 and reach 793 million tons.
While China's coal production is expected to increase by 57 million tons in this period, it is calculated that Russia's production will reach 445 million tons with an increase of 16 million tons. Russia stands out as one of the countries where the highest increase in coal production is expected.
Coal production of the USA and EU is expected to decrease by 44 million and 82 million tons, respectively.
Coal imports from the USA and Colombia could be increased
While coal exports from the largest coal exporters Indonesia and Australia to the EU are limited, it is unlikely that these countries will increase their coal exports to the continent as they have already reached their maximum production capacity.
The IEA predicts that Indonesia's exports, which had 440 million tons of coal exports last year, will decrease to 415 million tons by 2024, while Australia's exports, which were calculated as 376 million tons, may reach 388 million tons in the same period.
The world's third largest coal exporter, Russia, is followed by the USA, South Africa, Colombia and Canada, respectively.
It is calculated that the USA and Colombia, which are among the coal supply alternatives of the EU, can increase their exports to a certain extent, but this amount will not be enough to replace Russian coal.
It is estimated that the coal exports of the USA, which was at the level of 80 million tons in 2021, may decrease to 57 million tons by 2024, the exports of South Africa to 63 million tons and Colombia to 54 million tons.
When all alternatives are examined, it is predicted that the EU will not be able to quickly and economically replace the amount imported from Russia due to the coal embargo.
coal embargo
EU Commission President Ursula von der Leyen announced that as part of the 5th sanctions package to be implemented against Russia, they would ban coal imports worth 4 billion euros per year from the country, and that this embargo would create a significant loss of income for Russia.
After the decision, the ton price of coal in April contracts in the API2 Rotterdam Coal Futures Market had risen again above $300 after three weeks.
Coal prices hit an all-time high of $459.8 on 8 March due to the impact of the war.
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