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Asia is Boiling, but Coal Prices Won’t Be as Hot as Last Year!

The heat wave currently hitting most countries in Asia has also had an impact on increasing coal prices. This is because demand for coal is expected to increase along with increasing energy needs during the current hot weather.

Coal prices continue to creep up and have now reached the level of US$ 190 per ton. In trading Wednesday (26/4/2023), the May contract coal price on the ICE Newcastle market closed at US$ 190 per ton. The price strengthened 1.69%.

This price is the highest in the last four days. Yesterday’s strengthening also extended the positive trend in black sand prices which strengthened for two consecutive days with a gain of 2.1%.

However, it is estimated that the increase in coal prices in 2023 will not be as fantastic as the spike in 2022 which exceeded US$ 400 per ton.

Chairman of the Indonesian Mining & Energy Forum (IMEF) Singgih Widagdo estimates that the spike in coal prices this year will not be as high as the increase in 2022 because the trigger is different.

In 2022, the spike in coal prices was triggered by the “explosion” of the Russia-Ukraine war on February 24 2022, giving rise to uncertainty in world geopolitical conditions. Moreover, a number of Western countries have embargoed energy commodities from Russia.

Meanwhile, the current price spike was triggered by the heat wave that hit several countries in Asia, so that in the short term coal demand also increased.

“However, we also have to see that this increase will not be as far as the increase when there were issues related to the Russian invasion of Ukraine. This is very different, so I see this as more of a real increase ,” he explained to CNBC Indonesia in the ‘Mining Zone’ program.

Singgih projects that coal prices can still rise above US$ 200 per ton, but it is not expected to reach above the level of US$ 250 per ton. He estimates that coal prices will probably only reach a level of around US$ 220 per ton.

“This will return around US$ 200 per ton, even up to US$ 200 something. But I’m sure it will be below US$ 250, around US$ 220 (per ton),” he explained.

As is known, coal prices continue to creep up and have now reached the level of US$ 190 per ton.

Coal prices are rising again because demand from China and India is projected to increase. India is facing a heat wave that will increase electricity use for air conditioning.

In contrast to last year, China’s manufacturing activity is expected to start to grow this year. This condition will further increase demand for energy sources so that China will have to increase electricity supplies even more.

Deepak Kannan, global head for coal pricing from S&P Global Commodity Insights Ltd, estimates that coal prices could continue to strengthen to US$ 80-85 per ton in June-September.

“In the short term, coal prices will really depend on how fast China’s economy is and how much they import,” said Kannan, quoted from BQ Prime.

Source : CNBC