Consistent decline in global coal prices has investors worried. Price of coal is already at the lowest point over the past three years. Global demand is on the decline as countries and companies look towards alternative sources. The push for renewables has only gotten louder in recent years. But does this mean that coal is facing a structural decline? Or is this just a seasonal slump? This blog focuses on two major factors which can provide us with the answers:
Industry Resilience: Yes, at $61 per tonne compared to $144 per tonne last year coal prices are down significantly. However, this is not the first time that this has happened. Yes, the trade war is hurting. But this is only a part of the picture. The trade war will not last forever, and once the global economy picks up, coal could touch new heights once again. The reality is that the coal industry has survived many such shocks in the past. and has managed to bounce back each time. The reason behind this resilience? Coal supply remains abundant and producing electricity from it remains the preferred choice of many countries.
Demand is Still on the Rise: Despite the potential impact on the environment, coal is still the fuel of choice. A good example of this is Indonesia. During May 2019, Indonesia’s coal exports stood at 30.6 million mt highest in the past five years! Largest destination for Indonesian coal was the Indian market, which is seen recovering from the traditionally weak monsoon season. But that phase was also temporary as annual demand for Indonesian coal is up by 3%. Other South-East Asian countries such as The Philippines, Thailand, and Malaysia have also witnessed strong demand in recent times. This shows that coal is holding its own in the market.
To sum up, it is clear that the recent slump in coal demand was nothing more than a blip. Despite all the odds, the need for coal remains high in the seaborne markets. Yes, the renewables will eventually take over, but that phase is still in the future. So, it is time for investors and companies to be patient and hold on to their coal assets. Better times are coming!
Tags: Global coal price, Indonesian Coal, Seaborne Coal
Edited By: CoalShastra
Author: Shrey Bhandari