Asian coal prices surge as Russia conflict drive demand

Demand is anticipated as the market look to replace Russian supplies.

Coal prices in Asia have spiked amidst the continuing conflict between Ukraine and Russia global consumers switch from Russian supplies, Rystad Energy reported.

Coal prices have surged by 81% from March 1, which was largely due to constraints in Russia as well as traders rushing to reduce their exposure to Russian coal.

“Asian coal prices have followed suit due to potential demand for Asia-Pacific Basin coal to replace Russian supplies amidst an already regional market,” Rystad Energy Senior Analyst Kaushal Ramesh said.

“This sentiment appears to be catching on the LNG community as well, with traders pre-empting further sanctions hesitant to commit to purchases of Russian liquefied national gas (LNG) cargos.”

According to Rystad Energy, Germany has already set aside $1.7b to buy LNG outside Russia as part of its energy supply diversification. The research firm noted this indicates that countries could be prioritizing their energy security over emissions concerns in the near term.

Despite the movement away from Russian gas and LNG, day on day flows from Russia was unchanged. Export infrastructure through Ukraine, meanwhile, remained intact despite airstrikes.

Moreover, Rystad noted LNG import figures have become “concerning” with regas utilization in the United Kingdom declining to 54% from 81% in February. Lithuania amongst other European Union member states, has also banned imports of Russian LNG.

“That said, the arbitrage signal for marginal cargoes in the Atlantic is heavily slanted to Europe, as Asian buyers may be unwilling to replicate the price surge on the TTF beyond a notional $50 per metric million British thermal unit,” Ramesh said.