Coal is re-emerging as a key source of energy for European countries who are racing to replace increasingly scarce natural gas with coal.
Russia retaliates against sanctions by using its energy exports to do so. Coal is being used by Germany to secure energy supplies.
Since last year, power generation using coal has increased in France, Germany, Italy, Netherlands, Spain and the UK Coal consumption has increased in Europe.
Ole Hvalbye, an analyst at Swedish bank SEB, said that coal is making a comeback. It's all about surviving the winter now.
The factors that shape the appetite and market for coal are laid out in this section.
Natural gas prices have gone up a lot.
European natural gas prices have gone up 300% this year and set a new high in August.
Power companies in Austria, the Netherlands and Italy are considering using coal again. The Uniper plant is a coal-burning one.
"Coal has been the cheaper option for power generation for most of 2022, and has also been given a boost by the tight supply situation for gas in Europe," Rnningen said.
Coal is expected to be the more competitive option over the next two and a half years.
European coal prices alone have risen about 150% since the start of the year as global coal prices hit their highest level since 2008.
The loss of Russian natural gas volumes in Europe is cascading into global energy markets.
"Other fossil fuels such as oil and coal are flowing from the global markets to Europe due to ridiculously high prices there."
Coal prices in Europe and Australia are five times higher than normal.
The winter is on the way.
EU governments are under pressure to secure energy supplies for the cold months.
The winter is going to be very difficult. Europe will need all the other alternatives they can get, heading into this storm, as Q4-22 and Q1-23 will be hard.
The EU imposed a ban on Russian coal imports in August. According to Commerzbank, the majority of the bloc's coal comes from Russia.
The countries will rely on imports from the US, Australia and South Africa.
It's difficult to find sellers to fill the gap. Rnningen says that the global coal market is very tight.
It is slow to ramp up production in countries like Australia or Indonesia.
There's a hydropower crunch.
Extreme summer heatwaves in Europe have caused a shortfall of hydropower and increased the appeal of coal.
Norway is a top supplier of electricity to Europe. The seven European countries that have cut hydroelectric production this year are:
With insane natural gas prices and tight power output from hydroelectricity, the increasing demand for coal is likely to continue.
The River Rhine was at crisis levels due to the lack of water. The government of Germany is worried about a coal shortage.
What time will it last?
According to Hvalbye, SEB sees a high likelihood of coal prices staying elevated.
Rnningen thinks the EU will lead to a decline in coal in Europe by the year 2024.
Coal is coming back in the short term. He said that the longer term wasn't so much.
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