The Ukraine War Boosting Coal’s Resurgence

There appears to be a coal renaissance as coal, a fossil fuel that should be phased out and replaced by renewable energies, dominates in various markets. China has steadily grown its output, recording a 15% rise in its March production as compared to the same period in 2021. This is equal to about 12.7 million tons daily, which exceeds the country’s 2022 daily production rate of 12.6 million tons.

This increase comes despite the implementation of new lockdowns across China after another coronavirus outbreak. The country is focused on keeping its levels of production high as the uncertainties introduced to the supply chain after Ukraine’s invasion by Russia continue to rise.

Indonesia is also considering exporting this fuel to new buyers in Europe even as more countries impose sanctions on coal from Russia. Figures show that in March, Indonesia’s coal exports hit new highs. PT Adaro Energy, the number-two main miner of coal in Indonesia, has exported roughly 300,000 tons of coal to Europe as it works to fill the gap left by sanctions on Russian coal.

Lie Luckman, the company’s chief finance officer, stated that the firm’s primary market was Asia, noting that despite the demand from Europe, it remained focused on fulfilling its existing commitments to its long-term contract consumers, including India, South Korea, China and Japan.

Adaro plans to maintain its current coal trade agreements, but given coal’s demand in Europe as a relatively cheap and reliable source of energy, it may take on more commitments, especially since the EU plans to ban coal imports from Russia with effect from August. The imminent ban has prompted governments in the region to increase production of renewables as well as fossil fuels even as they rush to secure their sources of energy by looking into other import options.

Unlike the EU and Germany, India is using the situation in Eastern Europe to purchase low-cost energy. The country, which already acquired oil from Russia, is now taking this chance to buy affordable coal. Figures show that last month, coal imports into India hit a new record, given the country’s reliance on foreign coal.

Analysts note that China and India may continue growing their imports of coal from Russia as the country offers lower prices as a response to losing other export partners. Currently, Russia is selling its coal at about $60 per metric ton, which is quite a steal at a time currently as energy prices have risen significantly.

As the coal from Russia gets cut off from most of the global market, other sector players such as Arch Resources, Inc. (NYSE: ARCH) could soon find themselves swamped by supply requests countries that previously depended on coal sourced from Russia and its allies.

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