The people of this coal-mining hamlet say they grasp little about Russia’s invasion of Ukraine. But they do know it has translated into boom times for them.
In the wake of the war, Europe is weaning off Russian coal and turning to Colombia and a host of other countries from South Africa to Australia with an urgent appeal: Sell us more coal. A commodity that was fetching $134 a metric ton at the start of the year is now selling for up to $400 a ton, leading coal producers to try to crank up production and creating a windfall in towns like Tópaga, located in the mountains in the heart of this country.
“It’s a very good moment,” said César Pardo, a miner who has seen his salary grow threefold in a matter of weeks. “With prices today, there’s a lot of business going around for everyone, from the smallest (mines) to the very biggest.”
With a European Union embargo on Russian coal imports set to start in less than two weeks, importers are racing to wean themselves off what for the continent has been the main provider of coal for power generation.
César Pardo operating a winch that pulls a coal-laden wagon out of the mine shaft at the El Diamante mine in Tópaga.
They are buying it from open pit mines cut into South Africa’s Mpumalanga Highveld and the vast Illinois basin, in Illinois, Kentucky and Indiana. Germany has been buying from Australia—the world’s second-largest exporter of the thermal coal used to generate electricity—the coal dug up from rolling hills in the wine-growing Hunter Valley region.
The purchasing surge comes despite the pledges of many countries to reduce their coal consumption to combat climate change. Climate activists have expressed concern but say they see the renewed demand being short-term.
“The world has changed,” said Nicolás Arboleda, mining and metals analyst at Baker McKenzie in Bogotá, the Colombian capital. “Thermal plants using coal in Europe are again active.”
Russia accounted for about 46% of the coal consumed by the EU in 2021 and about 40% of its natural gas. As a response to a flurry of sanctions after Russian President Vladimir Putin ordered troops into Ukraine on Feb. 24, Moscow throttled deliveries of natural gas, creating shortages and leading to soaring prices.
Europe has responded in part by turning to non-Russian coal. The Paris-based International Energy Agency said in a report issued Thursday that coal consumption in the EU is expected to rise 7% this year. With China forecast to reduce imports by 45 million tons this year, coal shipments that would have gone there can be redirected to Europe, said Carlos Fernández, senior coal analyst for the IEA.
“The decline in Chinese imports in 2022 will be bigger than the increase in European imports this year,” said Mr. Fernández.
Germany’s coal imports from Australia were up 21% from March through May compared with the same period in 2021, according to customs data collected by Trade Data Monitor. Though a major supplier to Japan and other Asian countries, Australia accounted for nearly 17% of Germany’s coal imports during that three-month period ending this past May.
Imports in Germany of South African coal in that March-to-May period were seven times what they were in those three months in 2021. South Africa accounted for 8.1% of Germany’s imports in that period, up from less than 1% in the same months last year.
A miner drilling into a seam of coal in the El Diamante mine. The rise in coal prices has brought the long-abandoned mine back to life.
Coal moving along conveyor belts of a crusher at a coal collection depot in Tópaga.
Colombia shipped almost four times as much coal to Germany from March through May as it did in those three months the year before, figures collected by Trade Data Monitor showed. It now accounts for more than one in every 10 tons Germany imports, though President-elect Gustavo Petro says he wants Colombia to transition from fossil fuels for environmental reasons.
The U.S., too, is ramping up, with shipments to Germany increasing by more than 10% over the same period, according to customs data collected by Trade Data Monitor.
Poland, another major buyer of Russian coal, has gone with imports from Kazakhstan, which more than doubled in the three months through May in comparison with the same period in 2021, according to customs data from Trade Data Monitor. Colombia and Canada have also provided more coal.
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Officials in Indonesia, the world’s top exporter of thermal coal, say they have seen opportunities in shipping more coal to Europe. Indonesia, a major provider of the commodity to its Asian neighbors, only exported 1.6 million tons to Europe from March through June this year, a little more than the EU consumes in a day.
But it was 40 times what Indonesia provided in the same period last year, according to Kpler, a commodities data provider. Indonesia shipped roughly $112 million worth of coal to Italy in the first half of the year, according to official data released in July. Indonesian coal also went to the Netherlands, Poland and Switzerland.
The “impending ban on Russian thermal coal has seen European demand spill over to sources such as South Africa, Australia and Indonesia, which have been traditionally the main sources of coal to Asia,” said Deepak Kannan, head of global coal pricing at S&P Global Commodity Insights, which assesses market prices.
Churning out more coal isn’t easy even as the IEA forecasts that global coal consumption will this year match the annual record set in 2013. The industry has received little investment in the West in recent years as governments emphasized the need for renewables to combat climate change. Extreme weather events have posed problems, as well as logistical challenges and a shortage of workers.
A mural painted on the facade of a mining museum in Tópaga.
A statue in honor of the coal miner stands in the central plaza of Tópaga.
Here in Colombia, the fast rise in coal prices brought back to life the long-abandoned mine called El Diamante—the Diamond.
Gustavo Nuñez, owner of El Diamante and another small mine, had to close in 2019 when prices were low and his miners were unable to easily find a sizable coal deposit to exploit. But with prices shooting up this year, his miners—all six of them—were back in El Diamante again, this time finding a rich vein in a shaft that runs 200 feet deep.
“This was the opportunity to reactivate the mine,” said Mr. Nuñez. “In these 15 years in business, this is the first time the prices have been so high. We haven’t seen this before.”
The mines that dot the mountains here are small, family-run businesses that in the past just sold coal locally.
But the middlemen who buy the coal now redirect the fossil fuel for export, which is what bigger mining companies in Colombia, among them the U.S.-based Drummond Ltd. and the Anglo-Swiss Glencore PLC, have always done. One local collection center here in Tópaga says 2,500 tons a month go for export now, 12 times what that center sent for export monthly in 2021.
In this town of 3,600, mining families are buying new motorcycles and renovating their homes. “On market day, we are seeing lots of shopping,” said Álvaro Barrera, the mayor. “You can tell there’s much more cash flow among the families here.”
Among those benefiting is Abraham Molina, who is 36, has worked in the coal mines for 22 years and has the calloused hands to show for it. On a recent day, he had come out of the mines, covered in soot after loading up coal in the morning. But he reeled off how his life had changed for the better now that he’s earning 30% more than before.
“I’m saving so my girls can study, so they can have a future,” he said. “And I’m making repairs in my house, doing the floors and painting, all thanks to this bonanza.”
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- On August 18, 2022