European, Asian coal users scramble for new sources ahead of EU Russia ban

EuropeanandAsiancoalimporters are expected to join thescramblefor alternativesourcesof the fuel as a European Union ban on Russiancoalimports looms, analysts and company officials said.

But with top exporters Australia and Indonesia having already hit production limits and major producer South Africa constrained by logistical problems, some importers may struggle to maintain supply levels. The expected rush is likely to keep globalcoalprices elevated.

TheEUbanis to take effect from mid-August, a month later than initially planned, according to twoEUsources, following pressure from Germany to delay the measure.

In top-10coalproducer South Africa, Exxaro Resourcestold Reuters it had already received numerous requests from European countries wanting to sign supply contracts.

It said it has the right quality ofcoalfor theEuropeanmarket, but that current production has already been allocated, and that South Africa's struggling rail network means miners will not be able to export more to meet the increased demand.

"South Africancoalproducers are able to produce morecoal, but significant work will need to be done to improve logistics in order to ramp upcoalsupply for export," Exxaro said.

State-owned rail company Transnet's capacity to haul mineral exports has been limited by cable theft and vandalism.

German energy company Uniper said it has taken steps to ensure itscoal-fired power plants inEurope can be technically operated withoutRussiancoaland decided not to extend itsRussian supply contracts.

Toby Hassall, a lead analyst with Refinitiv, said mostEUbuyers' contracts forRussiancoalwould be for a year or less.

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Very limited spare capacity

Coronado Global Resources, with metallurgicalcoaloperations in Australia and the United States, said it has received queries forcoalin recent weeks fromEurope.

It expected to be able to meet some of thenewdemand but said volume, destination and timeframes were confidential. Coronado expects to produce between 18 million and 19 million tonnes in 2022.

"We have plans for growth in future years beyond this," a spokesperson said in emailed comments, without elaborating.

Australian producers WhitehavenCoalandNewHope Corp said they have been approached by prospective customers but their priority was to serve existing customers.

In Asia, at least two utilities in Japan and South Korea have haltedRussiancoalimports. Others may have to follow suit if sanctions are expanded.

Japan, the world's third-largestcoalimporter, plans to reduceRussiancoalimports gradually while looking for alternative suppliers due to the sanctions against Moscow, the country's industry minister said on Friday. He acknowledged, though, that it would be hard to find alternative suppliers immediately.

Japan's Kyushu Electric Power Co Inc stopped buyingRussiancoalas of end-March, a company spokesperson said.

Kyushu Electric, which bought 7 per centof its thermalcoalfromRussiain the year to March 31, 2021, is procuring supplies from other regions, the spokesperson said, without specifying where.

"We have no plan to buyRussiancoalthis financial year," he said.

In South Korea, at least one unit of state utility Korea Electric Power Corp (KEPCO) began diversifyingcoalsupply away fromRussiain February, a source with knowledge of the matter said.