Netherlands joins Germany, Austria, in relaxing coal ban, prices spike

21 Jun 2022

Quantum Commodity Intelligence - The Netherlands has joined Germany and Austria in boosting coal power generation in a bid to preserve gas supplies ahead of the crunch winter season.

The Netherlands said it would lift all restrictions on power stations fired by the fossil fuel, which were previously limited to just over a third of output, as the European states look to build up natural gas reserves over the summer months.

Berlin and Vienna made similar announcements on Sunday as Moscow, facing sanctions over Ukraine, cuts gas supplies to Europe.

"The cabinet has decided to immediately withdraw the restriction on production for coal-fired power stations from 2002 to 2024," Dutch climate and energy minister Rob Jetten told journalists in The Hague, reported France’s AFP news agency.

Rotterdam coal futures jumped to a three-month high after the European nations announced they will relax the ban on burning coal.

The ICE-listed API2 futures contract for July were trading around $373/mt Tuesday, up nearly 7% on the day and around 25% over the past week, taking prices to the highest level since early March when energy prices spiked following Russia’s invasion of Ukraine.

“Coal markets are suffering from tight supplies, with Europe having already banned imports of Russian coal. This has led to a surge in coal benchmark prices both in Europe and Asia," said ANZ commodity strategist Daniel Hynes.

Asia/Pacific prices have also rallied over the past week with FOB Australia Jul22 coal futures trading on ICE at $393/mt, basis Newcastle, up over 20% in the past week and close to the record highs of above $400/mt in late May.

Benchmark Dutch TTF futures for July closed up just over 4% Tuesday at €125.56/MWh, maintaining the upwards trend in place since last week when prices rallied from around €80/MWh.

The Dutch minister said his country had "prepared this decision with our European colleagues over the past few days".


Germany however said it still aimed to close its coal power plants by 2030, in light of the greater emissions of climate-changing CO2 from the fossil fuel.

"The 2030 coal exit date is not in doubt at all," economy ministry spokesman Stephan Gabriel Haufe said at a regular news conference covered by AFP.

The switch back to coal came as Russia’s Gazprom stopped or reduced gas supplies to a number of European countries, including Poland, Bulgaria, Finland, German, Denmark, Slovakia and the Netherlands.

"I want to emphasise that at the moment there's no acute gas shortage," Dutch minister Jetten said. "However, more countries are now being squeezed (by Russia). That worries us."

The Dutch government said it was also making an "urgent appeal" to companies and businesses to save as much energy as possible ahead of the winter.

Germany's decision to power up its coal power plants came after Gazprom said it had been forced to dramatically reduce flows on the Nord Stream 1 due to maintenance equipment currently stranded in Canada due to the sanctions, warning that further delays could lead to a suspension of all flows.

The EU imports around 57 million mt a year of Russian coal, making it the largest export market, followed by China at 31 million mt, according to IEA data.