China Spurs Coal-Price Surge
For the first time, China’s coal imports surpassed its exports last year, causing coal prices to nearly double. Harsh winter storms forced China to halt its coal exports, pushing prices to rise more, according to this article in the Wall Street Journal:
Just since then, Asian prices have shot up an additional 34%. Last week, coal benchmarks hit all-time highs in the U.S., Europe and Asia. That’s adding to orries over global inflation already stoked by rising prices for everything from crude oil to cattle feed. “The velocity of the change has been remarkable,” says Thomas Hoffman, senior vice president for external affairs for U.S.-based coal supplier Consol Energy Inc., which he says is considering holding off on some commitments to supply coal to see if prices rise even further.
For the world, which uses coal for about 40% of its electricity, the result is similar to what happened after China became a net importer of oil in 1993. But the Chinese factor is unfolding much faster with coal. It wasn’t until China’s industrial development shifted into overdrive this decade that the nation began to shake global petroleum markets. Oil’s big price surge came after widespread brownouts in China in 2004 forced factories there to buy diesel fuel for backup generators, increasing the country’s foreign oil demand.
As need for coal worldwide is increasing, key coal suppliers — including Australia, South Africa and Russia — are struggling to meet demands.
The “China-driven coal boom” may be a windfall for the U.S. mining industry, according to the report.
“We’ve as an industry never seen such a dramatic…upturn in the market that seems to have such extended strength,” Bennett Hatfield, chief executive of International Coal Group Inc., another U.S. coal producer, said Thursday in a call with analysts.
Experts predict coal prices will keep rising into 2009.
Origin: Shai Oster, Wall Street Journal
