Coal shortage drives up prices and strains economy

Texas News Today

HONG KONG – Due to a coal shortage, fuel prices have reached record highs, revealing the challenge of isolating the world economy from one of the most important and polluting sources of energy.

There are many reasons for crunches, from a post-pandemic boom to supply chain tensions and ambitious goals to reduce carbon emissions. And it is expected to continue through at least the winter, raising concerns about fuel shortages in many countries in the coming months.

In China, tight coal supplies and rising costs have caused invisible power shortages for more than a decade, suffocating industry and causing signal shutdowns in some cities to save electricity. I had to.

Asia’s other major coal importers, including Japan and South Korea, are struggling to secure supplies. Whereas in Europe rising prices of coal and other energy resources have affected factory production and household bills.

It clearly reminds us that much of the world is dependent on coal just weeks before the United Nations Climate Summit in Glasgow, aimed at accelerating the transition from fossil fuels to renewable energy. Growth.

China, the world’s second largest economy and largest consumer of coal, is at the center of the current crisis. Beijing has been able to reduce coal inventories as it sought to meet its climate goals. In addition, Australia’s coal imports were suspended across the diplomatic line.

The impact of that decision last year is still reshaping the global coal supply chain, inviting new buyers to Australia and encouraging China to venture into Latin America, Africa and Europe in search of alternative suppliers. Used to be.

Globally, coal supply has not kept pace with demand driven by the global economic recovery since the slowdown in the pandemic last year. Last year’s production has declined by about 5% from 2019. Coal producers also say that it will take time to increase production. He says it takes nine months to get a new mining truck and it could take even longer to install new equipment in the mine.

Isidro Consunzi, chairman of Semerara Mining & Power, the largest producer in the Philippines, said: Ltd.

Most of its exports go to China. Last year coal prices had quadrupled. I don’t think anyone in the world expected such a situation. “

According to analysts, global coal dependence fluctuates with economic growth rather than government climate change ambitions. Global coal use declined during last year’s pandemic but is expected to remain above 2019 levels this year.

Laurie Symington, an analyst at Wood Mackenzie, an energy researcher, said: “There’s a difference between what people perceive to be energy shifts and what’s actually happening.”

China, the world’s second largest economy and largest consumer of coal, is at the center of the current crisis. power plant in China last month.

Photo:
Kylie Shen/Bloomberg News

Part of the tight coal supply is due to production shutdowns as countries try to meet their emissions targets. Spain, for example, last year stopped half of its coal production and promised to eliminate all coal-fired power plants by 2030.

The Paris-based International Energy Agency said the region’s deluge expanded decades of changes in coal trading patterns, characterized by “a shift in Asia and the decline of Europe in the international coal market”. where did it go.

The rise of Asia is helping push up prices. One third to half of its coal from Australia, one of the world’s largest coal exporters, was prompted by Canberra’s request before Beijing for an independent investigation into the origins of China’s Covid-19. I was going to.

Other Asian economies have benefited from the sudden availability of Australia’s supplies. Official data shows Australia’s coal demand grew 56% in South Korea and 65% in Japan in the first half of 2021 as China ran out of coal reserves in early 2020.

Many cities in China have experienced recent coal shortages and power shortages in efforts to meet stringent emissions targets. Power cuts before Christmas slowed factories and exacerbated supply chain concerns. Photo: Olivia Zhang / The Associated Press

Still, Australian exports are unlikely to close the gap between rising global demand, winter inventory competition and bottleneck supply. Analysts forecast global coal exports this year to grow by about 2.5% from 2020, but demand could nearly double.

India nearly doubled its July imports of Australian metallurgical coal used in steelmaking year-on-year, extending the trend from the beginning of the year, although supplies are still in short supply.

Nippon Steel in Japan Ltd.

A spokesman said he is extending Australia’s coking coal purchases this year as steel demand improves during the post-pandemic economic recovery.

According to a spokesman, some power plants in Japan are expected to run out of power this winter, and Japan’s largest power producer JIRA will soon be able to have adequate power supplies. I started inspecting.

In recent years, Australia supplies an average of 85 million metric tons of coal annually to China, which exceeds Canada’s annual production. To fill this shortcoming, China used distant countries. It could be more than twice as far from Australia. Coal imports from Russia doubled year-on-year to 21 million metric tons in the first eight months. Coal from the United States quadrupled to 5.7 million tons during this period.

A Nippon Steel spokesperson said it was increasing its purchases of coking coal in Australia this year as demand for the steel improved.

Photo:
Kim Jong Hoon / Reuters

Asian suppliers have intervened to replace Australia’s volume for China. Philippine producer Semirara said the average selling price of coal rose 49% in the first half of this year due to rising demand in China. The company is trying to increase its capacity to meet the high demand.

China’s attempt to find new buyers has not been easy. As Beijing’s dispute with Canberra deepened, the Chinese tried to control Indonesia’s purchases of coal, most of which were low-grade, increasingly avoided by the global market. However, attacks of heavy rains disrupted the supply. Indonesia’s coal exports to China fell 8.6% month-on-month in August, tracking similar declines in January, April and May, according to official data.

Colombia and Kazakhstan are among the likely winners. Prior to this year, Latin American countries were sometimes China’s only source of information. Colombia’s steam coal exports to China nearly doubled from a year earlier, to 2.8 million metric tons in the first eight months of the year. China’s share in Colombia’s coal shipments for metallurgy increased from 0.6% in 2019 to 21%.

Colombia’s Ministry of Mines and Energy estimates that coal production could increase by 50% this year by 2020. Juan Miguel Durand, president of the Colombian National Mining Association, said the storm is likely to last for years in South American countries. The demand for an economy recovering from a pandemic exceeds the global ability to shift to more environmentally friendly energy. He said Colombia’s coal production is receiving strong interest from investors from China, India, Japan and South Korea.

“We are in a window of opportunities to exploit and expand our mining potential,” Durand said.

In late August, Colombia’s fourth-largest producer of natural resources, Colombia’s Natural Resources, reopened its processing facility, which had been closed last year due to low prices and the pandemic. However, it will take at least six months to a year to install the replacement equipment to augment the supply, Semirara’s Kansunji said.

“Last year’s price was so bad that no one could make money, so we postponed the purchase of replacement equipment,” Konsungjie said. “But there is a time lag before supplies can resume.”

Colombia’s Ministry of Mines and Energy estimates that coal production could increase by 50% this year by 2020. Cerejon Coal Mine in Colombia.

Photo:
Nicolo Filippo Rosso / Bloomberg News

write to Chuin-Wei Yap ([email protected]), Kejal Vyas ([email protected]), Tsunoka Chieko ([email protected])

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