CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Coal: Sanctions open the chute for more US exports to Europe

By Daniel Tyson

19:43, 5 April 2022

A handful of coal
The EU's ban on Russian coal could increase US exports by 50% - Photo: Shutterstock

The US coal industry is primed to boost exports after the European Union targeted Russian coal for additional sanctions Tuesday, leading one executive to say “this bodes extremely well” for domestic producers.

Meanwhile, Central Appalachia coal prices heated up to a 13-year high of $106 a ton, the highest levels since 2008, while Illinois basin prices jumped to $109 a ton, a record last week, according to data from the US Energy Information Administration.

Prices and exports are expected to increase with the ban, worth 4bn ($4.4 bn) annually, “will cut another important revenue source for Russia,” European Commission President Ursula von der Leyen said in a statement. As of 2020, the European Union relied on Russia for 19 percent of its coal, according to the European Commission’s Eurostat site.

EU imports went up in 2020

Chris Hamilton, president of the West Virginia Coal Association, told Capital.com that Europe started increasing its coal imports around 2020 when issues started to plague green energy sources. “Europe has been increasing coal shipments to offset its renewable problems,” he said.

With Russia’s unprovoked attack on Ukraine, US coal exports could increase by more than 50%. In 2020, the US exported about 62 million tons, according to the EIA.

“I think this bodes extremely well for US coal,” he said of the EU’s ban.

Seaborne thermal coal traded above $400 a ton in early March, after a natural gas scarcity in Europe drove utilities globally to switch from gas to coal.

German return to coal

During the weekend, German top officials hinted the central Europe economic powerhouse could return to coal for power if Russian gas becomes unavailable.

Hamilton said issues still face the domestic coal markets, including an environmental stigma, workforce issues and operating in a capital-laden industry with few lenders willing to loan money at agreeable terms, if at all.

Gold

2,070.23 Price
-0.110% 1D Chg, %
Long position overnight fee -0.0193%
Short position overnight fee 0.0111%
Overnight fee time 22:00 (UTC)
Spread 0.50

Oil - Brent

78.33 Price
-0.950% 1D Chg, %
Long position overnight fee 0.0011%
Short position overnight fee -0.0230%
Overnight fee time 22:00 (UTC)
Spread 0.045

Natural Gas

2.73 Price
-1.590% 1D Chg, %
Long position overnight fee 0.0458%
Short position overnight fee -0.0677%
Overnight fee time 22:00 (UTC)
Spread 0.0050

Silver

25.17 Price
-1.240% 1D Chg, %
Long position overnight fee -0.0202%
Short position overnight fee 0.0120%
Overnight fee time 22:00 (UTC)
Spread 0.020

“We are facing downward pressures and have been for several years,” he said.

Key among those issues is the high capital needed to operate mines. Hamilton said it cost millions to start and operate a mine, let alone the cost of heavy equipment.

Banks say no to fossil fuel loans

Even with healthy profit margins and increased production and pricing, banks and financial institutions, such as Bank of America and Citibank, are steering clear of loans to the fossil fuel industries.

Additionally, the ESG (Environment, Social and Corporate Governance) trend is making it more challenging for the fossil fuel industry to receive funding, he said.

But, he said, there is a bright spot in the industry.

US thermal coal miners usually contract with utilities on 12- to 24-month agreements, where the price normally is below $50 a ton for most domestic producers. However, he said, recent contracts have been more favourable for the miners, both in pricing and duration.

This could lead to improved financial results and share prices in the future for major miners. 

Related topics

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 570.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading