European coal-to-gas switching prices now indicate that it will not be profitable for power plants to switch from coal to gas before April 2024, extending out from Q2 2023 last month. The gas supply crunch experienced by Europe this winter has been compounded by Russia’s invasion of Ukraine, in which sanctions may hamper Russian gas exports to Europe. Dutch TTF natural gas prices have increased by 54.8% MoM to €117.8/MWh as tensions have escalated in eastern Europe, although this remains 35.4% below recent highs in December.

While thermal coal prices in Europe have also increased by 50% since January, it’s profitability relative to natural gas has still improved. With Western Europe’s current energy insecurity, however, some governments are reconsidering their coal phase out policies. Italy, for example, has stated that they will reopen coal plants if necessary while France has lifted caps on coal power.

Although the ongoing situation in Ukraine is highly unpredictable, any potential sanctions on Russian energy resources would likely increase the scope for European coal imports going forward.