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Coal consumption expected to return to 2013 record levels: IEA


Coal prices are skyrocketing and global coal consumption is expected to return to record levels reached nearly 10 years ago as the global energy supply crisis continued.

While investors in coal stocks are having a productive day thanks to higher coal prices, curbs on carbon emissions are backing as markets and governments say, analysts say. scramble for traditional energy supplies amid bottlenecks caused by the Ukraine war, analysts say.

Worse yet, slowing investment in new coal-fired power facilities has tightened coal supplies even further, Shaw and Partners senior analyst Peter O’Connor told CNBC.Squawk Box Asia” on Friday.

“Who would have thought that dirty coal was the best performer of the last fiscal year. So far, this fiscal year has also been the best performer,” O’Connor said.

“And looking into the coming year through the northern winter with gas prices in Europe and gas supplies available, countries are turning back to coal.

“And supply [of coal] Is tight. Why? Because nobody has the capacity to build and the market will remain tight with weather and Covid. So that market is going to be at a higher level for a longer time, probably in 2023.”

At the heart of the continued increase in demand for coal is the shortage of gas as the European Union moves to reduce Russia’s gas use – stop using gas – while Russia responds by cutting back. supplies for the continent.

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The price of thermal coal used for power generation has increased by about 170% since the end of last year, rising sharply after the start of the Ukraine war.

In contrast, the other major traded coal, coke, a steelmaking feedstock, is trading lower. Motivated by different motivations, Economic growth stifled in China is cooling steel production and expanding demand for coke.

The International Energy Agency released a new report on Wednesday warning that global coal consumption will grow by 0.7% in 2022 to match the record set in 2013, assuming the China’s economy recovered as expected in the second half of the year.

“The global total will match the annual record set in 2013, and coal demand is likely to grow further next year to all-time highs,” the IEA Coal Market Update said. know.

“That dramatic increase contributed significantly to the largest-ever annual increase in global energy-related CO2 emissions, bringing them to their highest levels in history,” the IEA said. “.

Worldwide coal consumption has rebounded to around 6% in 2021 as the global economy recovers from the initial shock of the Covid pandemic, the IEA said.

At the heart of the continued increase in demand for coal is the shortage of gas as the European Union moves to reduce Russia’s gas use – stop using gas – while Russia responds by cutting back. supplies for the continent.

As a result, coal consumption in the EU is expected to grow 7% in 2022, higher than last year’s 14% increase, the IEA said.

“This is driven by demand from the power sector, where coal is increasingly being used to replace gas, which is in short supply and has experienced massive price spikes following Russia’s invasion of Ukraine.” it said.

“Several EU countries are extending the life of coal plants scheduled to close, reopening closed plants or lifting operating hours limits to reduce gas consumption.”

At the same time, Russia’s coal boycott puts additional pressure on coal prices, the agency said.

“Europe’s worst fears came true this week after Russia cut flows through the Nord Stream pipeline to 20% of capacity. Gas inventories may fall short of levels. high enough to get through the winter“ANZ Research commodity analysts Daniel Hynes and Soni Kumari said in a note on Friday.

“Given Europe’s limited ability to import parts, the country has the potential to stiffen competition for LNG shipments.”

Global gas markets, including Asia-Pacific, are feeling the pain.

On Wednesday, Japan’s Nippon Steel Corporation signed an agreement with mining and trading giant Glencore to supply thermal coal at $375 a tonne, the highest price a Japanese company has paid. for this item, according to Bloomberg.

Overall, rising energy costs continue to contribute to global inflationforce central banks to continue monetary tightening.

The Federal Reserve raises benchmark interest rate by 75 basis points on Wednesday, it was the latest in a series of rate hikes aimed at curbing inflation.



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