Sanctions on Russian Coal Producers: What Sanctions?

In February, the US imposed sanctions on top Russian coal producers, Suek and Mechel. This move unsettled the market and led to a significant rise in thermal coal prices. Suek holds particular significance in the thermal coal market, exporting approximately 40 million tons of high-quality thermal coal.

DBX issued a note to its clients at the time, suggesting that these sanctions were largely inconsequential and, in fact, presented a selling opportunity. The targeted producers and coal importing companies were deemed well-equipped to navigate around the sanctions. It turns out that these sanctions proved beneficial for Russia, creating a risk premium that enabled them to sell coal at higher prices. Since the sanctions' implementation, Russian coal export flows have surged from 13.2 million tons in February and March to 14.7 million tons in April, with expectations for further growth to 15.3 million tons in May.

‍