European Coal Prices Soaring

Spot physical European coal prices (ARA CIF) surged to an all time high of around $424/tonne this week based on Argus price assessments, surpassing the peak set immediately after the Russian invasion of Ukraine. European coal was trading at around $100/tonne a year ago as the region was progressively working towards phasing out the fuel entirely.

• Coal has faced years of underinvestment which has caused prices to soar as unexpected demand from Europe has emerged. European demand is likely to keep rising as the region increasingly runs short of ideas for energy independence from Russian gas in the short term.
• Germany, the Netherlands, Austria and Italy have all publicly mentioned plans to increase coal use for power generation as well as gas use reduction plans.
• A reduction in Russian gas flows in recent weeks is adding further pressure to European countries aiming to fill storage as quickly as possible ahead of winter when the impact of Russian gas flow disruptions will be most severely felt. Germany estimates full domestic gas storage will give them 2.5 months of supplies in the event of a Russian halt in gas supplies.
• EU officials have stressed that longer term emissions targets still remain on the table despite Europe’s turn towards coal and the move is only intended as a short-term fix.