However, the push to kill coal comes with teeth. Marketing or trading coal is now penalized by financiers and lending banks and by broader forces who can use coal activities to blacken a brand or a business as dirty. New coal mines are often refused development permission or lack the funding and there is also a shortage of coal miners. The push against coal is led by limited access to capital, uncertain demand outlook, labor shortages and the time it takes to increase supply. Strangely enough, it is this incongruency of increasing demand and difficulty increasing supply that is also fueling higher coal prices. S&P Global Platts saw Powder River Basin 8,800 Btu/lb coal at $16.90/ton, the highest price for that grade of coal in over 15 years, for example. Of course, higher natural gas prices are also part of this equation as gas generation took over some of coal’s position in the generation mix. But the COVID slowdown and rebound, and other issues cited above have meant that coal supply is constrained. It is also likely to stay that way as coal producers have no idea how long the demand lasts and face increasing difficulties politically and financially to increase production.

The trend to moth ball and retire coal plants early and scaling back of long-term supply contracts along with little on site inventory suggests that coal prices will remain high and volatile. The need to bring coal plants back online despite the political pressure against coal is also likely to be temporary and simply enhances the uncertainty around coal. This entire situation is a politically motivated shortage as there are plenty of coal reserves around that could be utilized.

DEC-21 ICE API2 Rotterdam Coal Future Price

Source: www.theice.com