Coal: European demand adds tension to the market

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Failing to receive Russian gas, several European countries are turning to coal. This demand is fueling the already very high prices.

The coal is on an upward slope and should not move from it. Strong Asian demand, especially in India and China, but also in Japan, had already caused prices to rise in recent months.

Russia’s entry into the war against Ukraine has fueled the bullish machine. In early March, prices rose above $430 a tonne, in a day that saw many commodities soar.

From Europe to Pakistan, coal is increasingly in demand

Faced with the drop in Russian gas deliveries to Europeans, in response to Western sanctions, coal is increasingly sought after in Europe.

It is also so elsewhere for other reasons: in Pakistan, for example, it is the rise in gas prices, amplified by the war, which is driving up the demand for coal », explains Simone Tagliapietra researcher on energy policies at the Bruegel Institute.

Europe’s desire to do without Russian coal by August adds pressure on other sources of supply, which can only cause an additional stress effect on prices.

Before the conflict in Ukraine, at the end of December, the International Energy Agency anticipated, in 2022, a record demand for coal up 6% (for electricity, but also the production of cement and steel). Figures that will inevitably be revised upwards.

Asian production increased

In recent months production has increased in Asia and reached a good level, according to an energy expert, but this will not necessarily affect prices. In particular because of the difficulties linked to the maritime transport of this production. There is indeed a risk of a bottleneck, both physical, due to the lack of bulk carriers, the ships that transport the coal, and financial, with transport costs which are still very high.

In this context, prices can only continue to climb, assure our interlocutors. There is currently no reason for coal to escape the trajectory of other energy raw materials.

►Also read: The France is preparing to restart a coal-fired power plant in Lorraine this winter

►Also listen: Why coal is holding back G20 climate commitments


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