Since the beginning of this year, the price of benchmark Australian thermal coal—one of the dirtiest energy sources—has zoomed up 80 percent to $146 a ton, its highest mark in more than 10 years, according to the Financial Times.
That makes Australian coal the world’s best investment so far this year, beating the 44-percent gain in Brent crude oil, the 28-percent rise in real estate prices, and the 25-percent bump in financial stocks, the FT said.
South Africa’s thermal coal has gained 44 percent in price this year, also its highest price in more than a decade, commodities data firm Argus reported.
Thermal coal is used primarily by electricity generating plants.
“Price increases have been primarily driven by robust demand from China,” Dmitry Popov, coal analyst at consulting firm CRU, told the FT.
Supply disruptions and reopening Asian economies, especially China’s, using more electricity has pushed prices to near-record levels, the FT reported.
Also, a drought in parts of China has dried up hydroelectric power generated by dams, leaving coal-fired plants to make up the shortfall.
In addition, China refuses to buy Australian coal because Australia called for an international investigation into the origins of the COVID-19 virus.
The ban is proving costly.
Supply-chain disruptions have interrupted shipments to China from Russia and South Africa; Indonesia, China’s chief foreign supplier, has been deluged with rains.
China has sought to cut coal consumption in response to consumers’ outrage over smog-filled cities and also to meet its commitments to the Paris climate accords.
Worldwide electricity demand will grow 5 percent this year and 4 percent in 2022 after slumping 1 percent in 2020, according to the International Energy Agency.
PUBLISHER’S NOTE: Environmental goals and promises, no matter how heartfelt, are jettisoned when the lights go out. The world’s transformation to a much greater reliance on renewable power will remain a slow and bumpy road. The bottom line is money, and for emerging markets the cheapest way to generate energy is with coal.