Page 4 - AsiaElec Week 22 2021

AsiaElec COMMENTARY AsiaElec

Coal’s 2021 rally takes advantage

of post-pandemic growth

Rising prices point to a post-pandemic recovery in
demand for coal from power generatoin and industry

GLOBAL RECENT rallies in coal prices and a rise in US example by investing in carbon capture and
coal exports point to a surge in demand for coal underground storage (CCUS).
worldwide as the global economy begins to enter Coal demand fell by 4% in 2020 as the eco-
a post-pandemic recovery. nomic slowdown caused by the pandemic
Seaborne coal prices have risen steadily for kicked in.
over a year, S&P Platts noted recently, pointing The IEA said at the start of 2021 that demand
to a lack of coal supply. Prices for imports into would recover by 4.5% in 2021, effectively com-
Europe reached $94.50 per million tonnes for pensating for the 2020 decline, putting demand
6,000 kcal/kg NAR at the end of May, compared above 2019 levels. The IEA said a rebound in
with $36.25 in May 2020. Asian coal-fired generation would account for
This points to sustained interest in coal as a three-quarters of the rebound in 2021.
generating fuel, at least in the short term, to pro- Current coal and gas prices seem to suggest
vide energy to boost economic recovery. that demand for fossil fuels will recover strongly
Economic growth is the main driver of this throughout 2021, as consumers in industry and
demand. Platts estimated that economic growth power generation struggle to meet demand for
would rise to 5.6% in 2021 after falling to 3.2% their products.
in 2020. Yet this can only be a temporary spike for coal
Recent figures from the IEA note that pend- consumers, and the continued ESG pressure on
ing investment on US fossil-fired plants is antic- coal-exposed companies to reduce coal con-
ipated to rise in 2021, and although Chinese sumption and CO2 emissions means that coal’s
investment in such plants is expected to fall in current strong market is unlikely to last in the
2021 from 2020, the rate of decline is markedly long run in the decade ahead.™
slower. This follows a global 10% decline in
spending on fossil fuel power in 2020.
It is a similar story for natural gas, also a
major generating fuel in developed economies in
Europe and Asia, and a go-to fuel to plug short-
term demand for electricity.
The Platts JKM marker for LNG delivered
into Japan and South Korea reached $10.313 per
mmBtu at the end of May, against just $1.938
exactly a year earlier. Similarly, the TTF bench-
mark for European gas prices rose to $8.888/
mmBtu at the end of May, up from $1.085/
mmBtu at the end of May 2020.
This comes at a time when many govern-
ments have committed to reducing emissions
and reaching net zero by 2050.
The IEA stated recently that the best way to
reach net zero was for a rapid fall in coal con-
sumption, principally in the power sector, and
its replacement with renewables, hydrogen and
in the shorter term, natural gas.
Indeed, a total coal phase-out would be
needed out by 2040, and in advanced economies
by 2030 in order to reach the target.
Where coal is more difficult to replace, for
example in some sectors of industry, the IEA
called for serious efforts to abate emissions, for

P4 www. NEWSBASE .com Week 22 02•June•2021