Russia’s invasion of Ukraine has set off a global scramble to secure energy supplies, including a renewed demand for coal, the world’s dirtiest fossil fuel, as estimated fuel shortages have sent prices soaring.
The volatility has prompted coal prices to spike roughly 30% in one week, with Asian Newcastle benchmark futures rising to $440 per metric ton, according to OilPrice.com, while Europe’s futures reported trading above $350 a metric ton — triple pre-pandemic levels.
Industry officials and analysts alike do not expect prices to go down anytime soon, with an estimated supply shortage of 3-5% in 2022, Reuters reports.
But coal industry experts say they do not anticipate being able to meet the demand, Reuters reports. “While demand has increased post-COVID, supply has not been able to pick up to meet demand,” said Siddharth Choudhary, a senior executive of thermal coal at global commodities trading firm Trafigura.
“Everything related to energy is in deficit,” Choudhary said. “So there is not [an] alternative. With the current crisis for Europe, coal looks to be the best option.”
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Meanwhile, coal from the Illinois Basin rose to $92.50 a short ton last week — a $17 spike and the highest price since 2005, according to S&P Global Market data.
The about-face on coal comes as markets brace for a squeeze in oil and gas supply from Russia.
But it’s not necessarily good news for coal producers in the United States. Jason Bostic, vice president of the West Virginia Coal Association, told West Virginia MetroNews, “I’m afraid it’s a trend.”
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“You would think higher prices would be a relief to the coal industry, especially given the lean years we’ve had recently,” Bostic said. “The reason why it’s concerning to me is it’s indicative of an overall energy shortage in this country and around the world, because of a lack of investment in the base industries that keep the country and the world moving,”
