In early June 2021, the price of coking coal in China increased sharply due to concerns about reduced supply when demand recovered from steel mills. Not only China, but also Europe, the US … are no exception when the coal price is feverish again, hindering the Government’s efforts to bring down the price of steel.
Hot temperatures in North Asia cause a sharp increase in the demand for air conditioners, leading to an increase in coal demand. In the first four months of the year, Shandong produced 11.14 million tons of coke. As expected, this year, coke production in Shandong will not reach 32 million tons.
Due to strong demand from Chinese steelmakers, the upward trend in coal prices is expected to continue.
In Australia, thermal coal prices have hit a three-year record high due to strong demand for the country’s high-quality coal. There was a time when the price was up to nearly 120 USD/ton in the Hunter Valley – the main source of coal in the world, the product is coal with an energy content of over 6000 kilocalories.
China has to pay a higher price to buy coal from abroad because of strong domestic demand. Not only that, they also have to compete fiercely to buy the coal with the highest energy content, due to the policy of restricting the import of Australian coal.
Authorities will soon relax restrictions on both the volume and quality of coal imports in the coming months, as the heat of the northern summer is expected to drive electricity demand even higher.
India is also considering buying coal from Australia because it is relatively cheap compared to coal of similar value from other countries.
In April 2021, Australia’s coal exports increased sharply by 8% to 287 million USD, of which exports to India alone increased 167% to 116 million USD.
While strong Chinese demand has not directly benefited Australian miners, the global shortage has raised prices for all types of thermal coal, including Australian.
Issues related to the relationship between China and Australia have partly supported the increase in coal prices. China’s thermal coal futures hit a record last month and are up 60% from a year ago.
Indonesia, the number one source of coal for Asia’s largest economy, has been affected by heavy rainfall. The country’s coal exports have fallen to 15% lower than before the Covid-19 pandemic.
This year, Asia’s coal price spike has spread globally. Accordingly, the price of coal in Northwest Europe increased by 1%, reaching the highest level in 2 years; spot coal in Pennsylvania also increased 22%.
Coal prices in Europe also increased due to colder than usual weather this year and a decrease in coal reserves. Coal remains the leading fuel for power generation because it is more competitively priced than gas.
According to forecasts by James Stevenson, head of coal, metals and mining research at IHS Markit Ltd. In Houston, coal prices may continue to rise sharply in the fourth quarter of 2021.
Expansion of new coal mines in Australia struggled to make Goldman Sachs Group Inc. raised its forecast for coal prices in 2021 and 2022. However, Morgan Stanley predicts supply in the Northern hemisphere will increase, causing coal prices in this region to drop. And IHS believes that, despite the increased coal demand in China, the severe pandemic in India – a large coal consumer – will cause global thermal coal consumption in 2021 to decrease by 55 million tons compared to 2019.
Source: VITIC/Reuters, Bloomberg
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