The global energy supply crunch continues to drive coal prices up and global coal consumption back to levels reached almost a decade ago.
Markets and governments are scrambling to stock up on traditional energy supply amid bottlenecks caused by the Ukraine war amid high coal prices, analysts say.
The lack of funding for new coal-powered facilities has further exacerbated the coal shortage, Shaw and Partners senior analyst Peter O’Connor told Squawk Box Asia on Friday.
Global coal consumption is expected to return to record levels reached nearly 10 years ago, as the global energy supply crunch continues.
While coal stocks are very popular among investors right now, Carbon emissions curbs have taken a backseat as markets and governments rush to stockpile traditional energy amid the Ukraine conflict bottlenecks, analysts say.
Moreover, slowing investments in new coal-powered energy facilities have caused coal supply to tighten even more, Shaw and Partners senior analyst Peter O’Connor said on CNBC’s “Squawk Box Asia” on Friday.
“Who would have thought dirty ol’ coal would be the top-performing stock last year. It is also the top-performing sector this year,” O’Connor said.
During the northern winter, gas prices in Europe and gas supply availability may force countries to turn back to coal.
what is the reason for the shortage of coal? Because nobody is building capacity and weather and Covid are likely to keep markets tight. Therefore, the market will remain higher for a long time, probably until the year 2023.”
Thermal coal prices have risen about 170% since late last year, rising sharply after the Ukraine war started.
This is different from the other major coal traded, coking coal, which is trading lower. Steel production and, by extension, coking coal demand in China are being reduced by muted economic growth driven by different dynamics.
A new report from the International Energy Agency was released yesterday, warning that global coal consumption will increase by 0.7% in 2022, matching the record set in 2013, assuming the Chinese economy improves as predicted later this year.
The global total would match the 2013 record and reach a new all-time high next year, the IEA’s Coal Market Update said.
That rise contributed significantly to the largest ever annual increase in global energy-related CO2 emissions over the past history, according to the IEA.
The global economy recovered in 2021 after the initial shock of the Covid pandemic and worldwide coal consumption rose by 6%.
Europe’s spare import capacity will probably not be enough and it will have to compete aggressively for LNG shipments.
Last Wednesday, Nippon Steel Corporation agreed to pay $375 a ton for thermal coal from Glencore, the highest price paid by a Japanese company for that product.
Energy costs continue to rise globally, resulting in central banks tightening monetary policy.
Gas markets across the globe, including Asia-Pacific, are suffering.