Montel Magazine 4 2021 - Nordic power spat - Page 23

“ Russia is making Ukraine suffer economically for its hostile political push ”
purchased around 1.5m tonnes of Colombian and US coal for fourthquarter delivery . “ They are still looking around , as Ukraine needs coal in January and February too .” This has in turn underpinned European coal prices , he says , with the region already facing a potential lack of the fuel over the winter as high gas prices continue to drive generation demand .
Benchmark European physical coal prices – or the Global Coal Des ARA index – averaged over USD 150 / t in November , around triple the level seen in the same month last year , as European generators ramped-up coalfired generation levels , while vying with Asian buyers for any available spot material . For instance , German hard coal plants accounted for over 9 % of the country ’ s power mix so far this year – and 14 % in November – compared with an average last year of just over 7 %, according to ISE Fraunhofer data .
A source with a Colombian coal supplier confirms Ukrainian energy firm Dtek has been requesting coal . “ Apparently [ in November ] they bought some seven panamaxes of Colombian and US coal ,” he says , noting there were also “ rumours ” Dtek was seeking coal from stock at Amsterdam , Rotterdam or Antwerp . At least five vessels from the US – seemingly laden with coal – were earmarked for delivery to Ukraine in November-December , according to vessel tracking data by VesselsValue .
Nevertheless , a spokeswoman for Russian state-owned rail operator Russian Railways ( RZD ) denies there has been any ban on coal exports to Ukraine . “ Russian coal rail shipments to Ukraine have been neither suspended nor limited ,” she says , adding “ every day , we have a stable volume of coal traffic . There are no significant fluctuations .” But a coal analyst with a utility claims RZD is unable to talk openly about the ban , noting “ it ’ s very sensitive , politically ”. The analyst adds : “ RZD will never be able to say they have cut railings to Ukraine . Only Putin can say such a thing ,” he says , referring to the Russian president .
A source with a Moscow-based trading house , meanwhile , has confirmed the restrictions were in place . “ Russia is making Ukraine suffer economically for its hostile political push ,” he says , with regards in part to Ukrainian efforts to block Russia ’ s Nord Stream 2 gas pipeline project . Ukraine , as well as several eastern European nations – and the US – oppose the pipeline , which doubles Russia ’ s capacity to export gas to Germany and increases the EU ’ s dependence on Russian energy .
A July agreement between the US and Germany paves the way for
Berlin to act , including pushing for EU sanctions , if Russia were to use energy as a weapon against Ukraine . The so-called “ joint statement ” also aims to hold Russia accountable for honouring its gas transit agreement with Ukraine and possibly extend it beyond 2024 by up to 10 years . But some ranks within Germany ’ s incoming coalition government – following 26 September elections – have lashed out against Nord Stream 2 , notably Annalena Baerbock , the co-head of the Green party and soon to be foreign minister . In October she accused Russia of trying to blackmail the German government into allowing the pipeline to start exporting gas by driving up European gas prices ahead of the winter demand season , an accusation denied by Russia .
Benchmark gas prices at Europe ’ s main TTF hub hit record highs in October , above EUR 162 / MWh . They have since fallen back to around EUR 88 / MWh , after Putin promised to increase gas exports to Europe , even though Nord Stream 2 has yet to launch despite being completed . The EUR 9.5bn pipeline , led by Russian state-controlled gas giant Gazprom with investments from five European energy firms , is currently facing new obstacles . Last month , Germany ’ s regulator suspended the certification process , saying the consortium needed to form a German subsidiary under German law before securing an operating licence .
Nord Stream 2 bypasses Ukraine as a transit nation and could eventually have an economic hit but will not impact Ukraine ’ s gas supply , most of which comes from EU countries . “ Ukraine has not had a gas supply contract with Gazprom for six years now ,” says Refinitiv ’ s Onyshkiv .
Turning back to coal , the source with a Moscow-based trading house says the “ official ” explanation of the cessation of shipments to Ukraine was “ allegedly ” due to higher demand from domestic Russian utilities . “ But obviously , this is some political decision , as exports to all other directions are still huge .”
Russian exports of all coal types grew more than 12 % in January- October , to nearly 180m tonnes , according to preliminary government data . “ The situation is difficult , but not critical ,” says Onyshkiv , noting however coal-fired generation still accounts for “ a good chunk ” of power output . “ It is flexible for balancing and manoeuvring the system , unlike nuclear and solar , and much cheaper compared with gas-fired generation . So , in Ukraine , it is important not only to have solid gas inventories , but also coal stocks for the winter season .” n
Montel Magazine 4 – 2021