Soaring demand for the world’s least-liked commodity sees thermal coal prices jump 106% this year

Published

3 years ago

August 19, 2021

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A freight train transports coal from the Gunnedah Coal Handling and Prepararation Plant, operated by Whitehaven Coal Ltd., in Gunnedah, New South Wales, Australia, on Tuesday, Oct. 13, 2020.

David Gray | Bloomberg | Getty Images

LONDON — Soaring electricity demand, infrastructure woes and a surge in global gas prices have triggered an extraordinary rally for the world’s least liked commodity.

Australian thermal coal at Newcastle Port, the benchmark for the vast Asian market, has climbed 106% this year to more than $166 per metric ton, according to the latest weekly assessment by commodity price provider Argus.

The Newcastle weekly index, which stood at a 2020 low of $46.18 in early September, now appears to be closing in on an all-time high of $195.20 from July 2008. Its South African equivalent, the Richards Bay index, ended the week through to Aug. 13 at $137.06 per metric ton, up more than 55% this year.

To put thermal coal’s remarkable rally into some context, international benchmark Brent crude is one of few assets to have recorded comparable gains this year. The oil contract is up 33% year-to-date.

The resurgence of thermal coal, which is burned to generate electricity, raises serious questions about the so-called “energy transition.” To be sure, coal is the most carbon-intensive fossil fuel in terms of emissions and therefore the most important target for replacement in the pivot to renewable alternatives.

Yet, as policymakers and business leaders repeatedly tout their commitment to the demands of the deepening climate emergency, many still rely on fossil fuels to keep pace with rising power demand.

It comes shortly after the world’s leading climate scientists delivered their starkest warning yet about the speed and scale of the climate crisis. The Intergovernmental Panel on Climate Change’s landmark report, published Aug. 9, warned a key temperature limit of 1.5 degrees Celsius could be broken in just over a decade without immediate, rapid and large-scale reductions in greenhouse gas emissions.

U.N. Secretary-General, António Guterres, described the report’s findings as a “code red for humanity,” adding that it “must sound a death knell for coal and fossil fuels before they destroy our planet.”

Earlier this year, Guterres pushed for all governments, private companies and local authorities to “end the deadly addiction to coal” by scrapping all future global projects. The move to phase out coal from the electricity sector was “the single most important step” to align with the 1.5-degree goal of the Paris Agreement, he said.

Outlook for thermal coal prices

Yulia Buchneva, director in natural resources at Fitch Ratings, told CNBC that thermal coal remains a key global energy source, noting the commodity still has a more than 35% share in global power generation.

“We expect that the share of coal in energy generation will decline driven by the energy transition agenda, however this will have a rather longer-term impact on the market. In the medium-term demand for coal in emerging markets with less strict environmental agenda, in particular in India, Pakistan, and Vietnam, where coal-fired power dominates generation, is expected to rise,” Buchneva said.

By comparison, Buchneva said that since the U.S. and EU account for only 10% of worldwide demand for coal, an expected contraction in these regions would have a limited impact on the global market.

When asked whether thermal coal prices could push even higher in the coming months, Buchneva replied: “The current high thermal coal prices have decoupled from costs and are therefore not sustainable. We expect that prices will normalize during the remainder of the year.”

Fitch Ratings assumes the price of high energy Australia coal will decline toward $81.

A bucket-wheel reclaimer stands next to a pile of coal at the Port of Newcastle in Newcastle, New South Wales, Australia, on Monday, Oct. 12, 2020.

David Gray | Bloomberg | Getty Images

Energy analysts cited a variety of reasons for thermal coal’s breakneck rally. These included rebounding power demand in China, Beijing’s informal ban on coal imports from Australia, supply disruptions in Australia, South Africa and Colombia, and rising global gas prices.

For the latter, analysts at Argus said Europe had incurred unseasonably low gas storages, weak liquified natural gas imports and modest pipeline imports from Russia. It has coincided with gas prices rising more sharply than coal and thus led to an increased incentive to burn coal at the expense of gas for power generation.

“Coal as an expensive substitute, especially in Europe given the need to buy pollution offsets via emission futures, is likely to continue into the winter period,” Ole Hansen, head of commodities research at Saxo Bank, told CNBC via email.

“This in response to low gas stock levels both in the US and Europe following a high demand season driven by extreme heat and economic activity,” he continued. “All in all, coal is in demand despite raised focus on climate change.”

Hansen said this was simply due to the lack of supplies from coal’s biggest competitor: natural gas.

Financing coal projects to become more difficult

“I’m reluctant to get into how this is going to continue to play out over the next few months. I think things are fairly fluid in terms of the impact of the virus on various economies and it doesn’t take much of a slowdown for things to really start impacting a commodity like coal,” Seth Feaster, energy data analyst at IEEFA, a non-profit organization, told CNBC via telephone.

“One thing I can say is that prices have been very volatile. And from a U.S. perspective, when coal companies talk about exports being their savior, we find that pretty suspect because volatility makes it very difficult for coal companies to have any kind of long-term plan around thermal coal exports.”

Smoke and steam rises from the Bayswater coal-powered thermal power station located near the central New South Wales town of Muswellbrook, New South Wales, in Australia.

David Gray | Getty Images News | Getty Images

Feaster said that while some countries appeared hesitant to move away from coal, it is becoming “abundantly clear” that financing for coal projects is drying up. “It is going to be very difficult going forward to fund any kind of new power projects for coal,” he continued.

“I think that that’s really going to become a pariah around the world for anybody to finance coal projects. It is going to become more expensive and more difficult.”

Environment

YMX Logistics deploys 20 new Orange EV electric yard trucks

Published

2 hours ago

November 22, 2024

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YMX Logistics deploys 20 new Orange EV electric yard trucks

YMX Logistics and Orange EV Join Forces to Deliver Zero Emission Transportation Solutions to Yard Operations Across North America

Leading yard operation 3PL YMX Logistics has announced plans to deploy fully twenty (20) of Orange EV’s fully electric Class 8 terminal trucks at a number of distribution and manufacturing sites across North America.

As the shipping and logistics industries increasingly move to embrace electrification, yard operations have proven to be an almost ideal use case for EVs, enabling companies like Orange EV, which specialize in yard hostlers or terminal tractors, to drive real, impactful change. To that end, companies like YMX are partnering with Orange EV.

“This relationship between YMX and Orange EV is a significant step forward in transforming yard operations across North America,” said Matt Yearling, CEO of YMX Logistics. “Besides the initial benefits of reduction in emissions and carbon footprint, our customers are also seeing improvements in the overall operational efficiency and seeking to expand. Our team members have also been sharing positive feedback about their new equipment and highlighting the positive impact on their health and day-to-day activities.”

This Orange looks good in blue

YMX Logistics electric yard trucks; by Orange EV.

One of the most interesting aspects of this story – beyond the Orange EV HUSK-e XP’s almost unbelievable 180,000 lb. GCWR spec. – is that this isn’t a story about California’s ports, which mandate EVs. Instead, YMX is truly deploying these trucks throughout the country, with at least four currently in Chicago (and more on the way).

“Our collaboration with YMX Logistics represents a powerful stride in delivering sustainable yard solutions at scale for enterprise customers,” explains Wayne Mathisen, CEO of Orange EV. “With rising demand for electric yard trucks, our joint efforts ensure that more companies can access the environmental, financial, and operational benefits of electrification … this is a win for the planet, the workforce, and the bottom line of these organizations.”

We interviewed Orange EV founder Kurt Neutgens on The Heavy Equipment Podcast a few months back, but if you’re not familiar with these purpose-built trucks, it’s worth a listen.

HEP-isode 26

SOURCE | IMAGES: YMX Logistics.

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Environment

Hyundai IONIQ 9 debut, new NACS Kia, solid state batteries from Honda

Published

3 hours ago

November 22, 2024

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Hyundai IONIQ 9 debut, new NACS Kia, solid state batteries from Honda

On today’s thrilling episode of Quick Charge, we’ve got the all-new Hyundai IONIQ 9 and its “a “rolling living room” pivoting captain’s chairs, Kia gets a go-fast 7 passenger SUV and an updated EV6, while Honda announces plans to start producing solid-state batteries at its new facility in just a few weeks.

We’ve also got big news for American workers – a Minnesota power company is ditching coal for solar while ExxonMobil and LG Chem get to work extracting thousands of tons of lithium out of Tennessee’s soil.

Today’s episode is sponsored by BLUETTI, a leading provider of portable power stations, solar generators, and energy storage systems. For a limited time, save up to 52% during BLUETTI’s exclusive Black Friday sale, now through November 28, and be sure to use promo code BLUETTI5OFF for 5% off all power stations sitewide. Learn more by clicking here.

You can watch the episode, below.

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Environment

One of the US’s first solar peaker plants – with Tesla Megapacks – just came online

Published

5 hours ago

November 21, 2024

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One of the US’s first solar peaker plants – with Tesla Megapacks – just came online

Arevon Energy has kicked off operations at Vikings Solar-plus-Storage – one of the US’s first utility-scale solar peaker plants.

The $529 million project in Imperial County, California, near Holtville, features 157 megawatts of solar power paired with 150 megawatts/600 megawatt hours of battery storage.

Vikings Solar-plus-Storage is designed to take cheap daytime solar power and store it for use during more expensive peak demand times, like late afternoons and evenings. The battery storage system can quickly respond to changes in demand, helping tackle critical grid needs.

Vikings leverages provisions in the Inflation Reduction Act that support affordable clean energy, strengthen grid resilience, boost US manufacturing, and create good jobs.

The Vikings project has already brought significant benefits to the local area. It employed over 170 people during construction, many local workers, and boosted nearby businesses like restaurants, hotels, and stores. On top of that, Vikings will pay out more than $17 million to local governments over its lifespan.

“Vikings’ advanced design sets the standard for safe and reliable solar-plus-storage configurations,” said Arevon CEO Kevin Smith. “The project incorporates solar panels, trackers, and batteries that showcase the growing strength of US renewable energy manufacturing.”

The project includes Tesla Megapack battery systems made in California, First Solar’s thin-film solar panels, and smart solar trackers from Nextracker. San Diego-based SOLV Energy handled the engineering, procurement, and construction work.

San Diego Community Power (SDCP) will buy the energy from the Vikings project under a long-term deal, helping power nearly 1 million customer accounts. SDCP and Arevon have also signed an agreement for the 200 MW Avocet Energy Storage Project in Carson, California, which will start construction in early 2025.

Vikings is named after the Holtville High School mascot, and Arevon is giving back to the local community by funding scholarships for deserving Holtville High students.

Arevon is a major renewable energy developer across the US and a key player in California, with nearly 2,500 MW in operation and more than 1,250 MW under construction.

If you live in an area that has frequent natural disaster events, and are interested in making your home more resilient to power outages, consider going solar and adding a battery storage system. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. They have hundreds of pre-vetted solar installers competing for your business, ensuring you get high quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use and you won’t get sales calls until you select an installer and share your phone number with them.

Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisers to help you every step of the way. Get started here. –trusted affiliate link*

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