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Coal Prices: What’s Happening?

Demand from China and India decreased. Indonesia set its benchmark coal price for December at $281.48 a tonne. An 8.67% decrease from November, the energy ministry announced late Thursday.

According to a statement from the energy ministry’s spokesman, Agung Pribadi, “China’s zero-COVID policy and India’s commitment to reduce coal-fired power prompted a decline in demand this month.”

The market for thermal coal has exploded due to supply problems, a drought in China, and rising electricity demand, making the least popular commodity in the world one of the best-performing investments this year.

The cost of high energy Australian coal, the standard for the sizable Asian market, has increased by 80% to roughly $146 per tonne since the beginning of the year, which is its highest level in more than ten years.

According to Argus’ most recent weekly analysis of commodities prices, its South African equivalent is also trading at its greatest level in more than 10 years, jumping 44% in 2021.

The benchmarks for coal are now outperforming two of the best-performing asset sectors this year, namely real estate (up 28%) and financial equities (up 25%). Only Brent crude, up 44%, enjoys gains that are comparable.

Prices for coal may currently be at record lows. The majority of coal producers are still in business despite operating at a deficit. One of the main causes of the cheap price of coal is the fact that they are still in operation.

Even if output has recently decreased, there is still an abundance of coal in the world. Production will increase if prices rise, limiting any significant increase in coal prices. The best you can expect for from here is a modest gain followed by a protracted plateau. China, the biggest steel producer in the world, has recently decreased its demand for coal. Natural gas competition from cheaper, cleaner sources is a consideration.

By regulating the output of electricity plants. Currently, China’s CCP has set a fixed price for electricity. Unfortunately, as a result of the current high price of coal, the production expenses are higher than the retail price, thus the more power the providers produce, the more money they lose. As a result, there isn’t enough energy being produced by the power plants to keep the lights on.

Australia has not imposed sanctions on the PRC; rather, the CCP has banned the import of coal from Australia. As on my most recent information, Canada is now supplying the coal that Australia once did.

According to what I’ve read, China (PRC) has a lot of coal on hand, but it’s not very good. Large coal deposits are present in most countries, however they are of very poor quality.

The best thermal coals for generating electricity and heating are found in Australia, and many power stations in the PRC have been retrofitted to burn this high-efficiency coal. Since the CCP has banned the import of Australian coal, power plants are forced to use a lot more of the subpar coal, which has increased coal costs.

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