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Reasons for Coal Petcoke Price Increase

Coal story – Part 1

Coal prices have jumped 300% from pre-covid levels- know the reasons

  • China and US have made major decisions to shift its power grid away from coal in its drive towards achieving carbon neutrality. Hence many miners are apprehensive on long term coal mining prospects which has resulted in shutting down of coal mines.
  • As a result US coal production in 2020 fell to its lowest level since 1965.
  • Covid restrictions also contributed to limitations in mining operation.
  • After removal of major covid restrictions, most of the economies took measures for economic revival which resulted in substantial increase in coal consumption.
  • China's coal import in 2021 was 323 Million Mts, highest since 2013.
  • China had imposed temporary restrictions in importing lower grade coal from Indonesia.
  • Difference of opinion between China and Australia resulted in temporary ban on Australian coal by China.
  • Above normal monsoon resulted in major flooding in Australia and Indonesia.
  • Disruptions in Railway lines in South Africa has restricted the movement (export) of South African coal.
  • Limited supply coupled with revival in demand had created major rise in coal.
  • Major power shortage threat due to non availability of coal resulted in removal of restrictions on coal imports by China. This has resulted in temporary softening of coal and petcoke.
  • Countries like Indonesia had to put temporary ban on coal exports due to acute power shortage.
  • However the softening was short lived due the conflict which emerged between Russia and Ukraine. With US and Europe supporting Ukraine, many sanctions have been imposed against Russia. Supply chain disruptions and sanctions on Russia has fuelled up coal prices again.
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Lower production, Increased demand due to economic revival efforts post covid, power crisis due to coal shortage, floods, supply chain disrutions and war has resulted in major coal price increase.