ASX coal shares are leaping higher today. In afternoon trading, New Hope Corp Ltd (ASX: NHC) is up 2.65% to $3.87 per share, and Coronado Global Resources Inc (ASX: CRN) has gained 3.4% to $2.14 per share.
The Whitehaven Coal Ltd (ASX: WHC) share price is running even hotter, up 4.2% to $4.50 per share.
Now the S&P/ASX 200 Index (ASX: XJO) is gaining today as well, but it's only up 0.55%. Meanwhile, the S&P/ASX 200 Energy Index (ASX: XEJ) is up 0.4%, while the S&P/ASX 200 Materials Index (ASX: XMJ) is up 1.23%.
So, why are ASX coal shares delivering far stronger gains today?
Russian coal to be banned from EU
Most of the tailwinds look to be coming from the European Union's looming decision to ban Russian coal imports. The EU legislature is poised to pass the measure today, though EU oil and gas imports from Russia have yet to be targeted.
While the coal ban won't take full effect until August, the implications for coal prices – already at historic highs – is bullish. That same implication looks to be driving up ASX coal shares today.
As Reuters reports, Russian coal comprises some 45% of the EU's annual imports. Last month alone, the EU imported 3.5 million tonnes of thermal coal from Russia, according to Braemar data.
Commenting on the pending ban, Braemar dry bulk analyst Mark Nugent said: "Despite Russian coal shipments to Europe in March still continuing at pre-war levels, the expected alteration in coal flows into Europe has started to show."
With Russian coal soon off the menu, European nations will need to shop elsewhere.
While much of the void is likely to be filled by the United States and South American producers, Reuters noted that the EU imported 537,000 tonnes of thermal coal from Australia in Q1. In the first quarter of 2021, there were no coal imports from Australia at all.
Now most ASX coal shares are already producing at near capacity. And it takes a lot of time to ramp up production.
Yet Coronado said it had received interest from the EU for its metallurgical coal, which is used in steelmaking rather than electricity production. Russia's metallurgical coal will also be banned come August.
How have these ASX coal shares been performing?
With both thermal and metallurgical prices hovering near historic highs, ASX coal shares have been well-outperforming the index.
Year-to-date, the Whitehaven share price is up 63%; the Coronado share price is up 65.8%; and leading the ASX coal shares charge, the New Hope share price has soared 67% since the opening bell on 4 January.
For some context, the All Ordinaries Index (ASX: XAO) is down 2.0% year-to-date.
