The high demand for coal power generation in late 2021 was driven largely by the rebound in economic activity after the COVID-19-pandemic-induced slump and surging natural gas prices. Global consumption of coal recovered in 2021 and exceeded 2019 levels. And this year, Western economic sanctions imposed on Russia, the world’s third-largest coal exporter, in response to its invasion of Ukraine, have caused coal prices to skyrocket. Newcastle coal futures, the benchmark for coal in Asia, crossed the $400-per-tonne mark and are just $20 away from hitting their record high.
The upward trend in coal prices is expected to continue in the coming months due to a continuing demand-supply imbalance. “There is simply an almost complete absence of surplus thermal coal available globally. Prices have shot past $400 and the $500 per tonne mark seems to be in play,” said Steve Hulton, VP of Coal at Rystad Energy. According to the EIA estimates, U.S. coal exports will be 486.90 million short tons in 2022 and 466.70 million short tons in 2023. The rise in coal exports amid strong coal demand globally and a high pricing environment should boost the profitability of coal companies.
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