Despite global expectations to move away from coal, demand in China is still strong, as rising global temperatures causing heat waves are driving up electricity demand and coal prices. Thermal coal futures reached record highs in July as a heatwave in China sent electricity use soaring. In industrial areas of the country such as Zhejiang near Shanghai, electricity use exceeded 100 million kilowatts per hour as temperatures rose to 37 degrees Celsius.
In response to the high energy usage across the country, coal prices exceeded 900 yuan (almost $140) a tonne in mid-July. This follows record prices for Asian coal in May, after an initially pessimistic outlook following the IEA report encouraging countries to move away from fossil fuels towards renewable alternatives.
In spite of growing international pressure, coal continues to boom across much of Asia, with China at the helm. Although China is attempting to move away from coal, rationing electricity use to battle the rising demand of the major polluter, hot temperatures are forcing the government to keep on producing as well as importing to meet this demand.
“Southern China has been very hot, and the daily power load is consistently breaking new highs,” Huatai Futures Co. analyst Wang Haitao stated.
In the Zhejiang region, only 30 percent of its energy comes from renewable sources, meaning that industrial regions across China such as these will still rely heavily on coal for years to come.
Another key driving force for coal prices has been the supply disruptions seen between Australia and China, as several fatal accidents in the industry have led to inspections as imports are halted.
Chief Executive Paul Flynn of Australia’s Whitehaven Coal explained on the rise in demand, “We are also getting requests to bring cargos forward from our Japanese customers as well, that certainly indicated that the market is a little short and more coal is required.”
The unlikely recovery of the energy source, which much of Europe and other regions have already moved away from, is owing largely to growing Asian demand. In fact, since the beginning of 2021, the price of Australian coal has risen by 86 percent, sitting at over $150 a tonne towards the end of July, the highest the market has seen since September 2008. Likewise, South African coal has climbed 44 percent in 2021.
Governments may be feeling the pressure to make the switch to cleaner energy, but with growing populations meaning growing energy demand, many countries simply can’t keep up without the continued use of oil, gas and coal.
As demand is rising again, Asia is not the only region looking towards a coal revival. In June, Glencore agreed on a $588 deal to buy out BHP and Anglo American to become the sole owner of the Cerrejon mine in Colombia.
The IEA is now projecting a growth in coal demand by 1.8 percent in 2021, higher than anyone would have previously thought, as coal plants across Europe become more and more scarce. This has made “the world’s least liked commodity one of this year’s best-performing assets.”
This also presents a dramatic shift from last year, as there was a significant slump in coal demand and prices in 2020 owing to lockdowns and other restrictions in relation to the Covid-19 pandemic.
So, as Europe continues to move dramatically away from its strong coal mining past, many parts of Asia, Australia, South Africa and South America continue to invest heavily in the traditional energy source as demand shows no plans of easing.