European coal futures climbed to a three-week high, buoyed by European Union plans for a phaseout of Russian coal imports in response to the country’s suspected war crimes in Ukraine. 

The price jump in Europe matches increases around the world as the Ukraine war prompts users to seek alternatives to Russian coal, which accounted for almost 18% of global exports in 2020. As the global coal trade tightens, U.S. coal prices have surged above $100 a ton to the highest in more than a decade.  

Russia is Europe’s top supplier of thermal coal, used to fuel its power stations and generate electricity. While the fuel has so far not been subject to direct sanctions, energy companies were already struggling to get their hands on Russian supplies. Many banks are refusing to finance commodities trading, forcing some of the continent’s biggest utilities to buy coal in South Africa and Australia.

The proposed EU sanctions would be added to a package of steps aimed at strengthening existing measures set to be debated this week by EU ambassadors, according to people familiar with the matter. The details of the ban and the timing of the coal phaseout are still under discussion, and the EU isn’t planning to sanction oil or gas for now, they said.  

Germany is ready to consider a Russian coal embargo and is in discussion with the EU about the timing of such a move, a German official said.

“This is a good move both for transitioning away from Russia and away from coal,” said Thierry Bros, a former energy analyst who’s now a professor at the Paris Institute of Political Studies. “We could replace this coal with other coal and gas. If we could replace half of Russian coal with gas it will increase our gas demand by 20 billion cubic meters a year. This is manageable if we do not embargo gas.”

Any sanctions on Russian coal will pressure already strained supplies. Coal stored in Amsterdam, Rotterdam and Antwerp harbors remain at the lowest for the season in at least six years, according to weekly survey of stocks by Argus Media.

“The proposed sanction would be devastating to European coal imports and make the supply situation of coal even tighter internally in the EU,” said Fabian Ronningen at Rystad Energy. “Overall coal imports to Europe have been declining in recent years, as coal has reduced its share in the power sector, but the share that comes from Russia has massively increased.”

European coal for next year, the continent’s benchmark, more than doubled this year as Russia’s invasion of Ukraine threatened to disrupt supplies. Prices for coal delivered to northwest Europe jumped as much as 11% to $211.25 a ton on ICE Futures Europe, the highest since March 8.

The rising cost of coal boosted German power prices, with electricity futures for next year advancing about 1% to 183.50 euros per megawatt-hour.