Europe imposes sanctions on Russia
The disruption to global coal trade flows caused by Western sanctions on Russia and the resulting increase in ton-mile demand will benefit the dry bulk market.
On April 7, local time, EU countries agreed to impose a coal embargo on Russia and give a 120-day phase-out period, a month later than originally proposed, giving EU member states time to find alternative sources of supply.
It should be noted that among the "three major items" of coal, oil and natural gas, coal is undoubtedly the easiest to start with. Russia is the main source of thermal coal in Europe. The import volume in 2021 will be 33 million tons, accounting for the total import of European thermal coal. more than half of the amount. On the Russian side, the ban will affect a quarter of Russia's coal exports, according to the European Council.
Relative to coal, there is currently no agreement within the EU to embargo Russian oil and gas. The largest trade between the EU and Russia is oil and natural gas, which is extremely important to the European economy. For the EU, the embargo on oil and gas is undoubtedly an act of "harming others and not oneself".
One broker said: “The flow and flow of the coal trade market is changing as European coal buyers rush to switch suppliers. The US, South Africa, Australia, Colombia and Indonesia may become alternative sources, increasing demand for dry bulk. The ton-mile demand for cargo ships. In theory this should have a positive impact on freight rates, but we need to focus on how long this is likely to last.”
Another market player added: "If a large number of ships go to Europe as a result, the results may be unexpected."
Because of the ban or the buyer's voluntary sanctions?
In fact, there have been signs for weeks that European buyers want to increase the supply of non-Russian coal. Either because they expected such a ban, or because they decided to sanction themselves.
It is not easy for the EU to find alternative sources of Russian coal. Coal exporters Australia and Indonesia have reached their production limits, and South Africa is also constrained by logistical issues, and a global rush to buy coal is expected to keep coal prices higher.
But this sudden collaboration is difficult. After all, alternative coal producers have their own supply needs, mostly from China and India. So if China or India's coal import demand increases, they don't have the extra capacity to sign long-term contracts with Europe.
The European Union is not the only region to impose a ban on Russian coal, with Canada, France, Germany, Italy, Japan, the United Kingdom and the United States jointly saying on April 6 that they would all "phase out and ban the import of Russian coal."
