Modern Mining June 2022

COMMODITIES OUTLOOK

With increased demand and supply disruptions, coal prices soared to new all-time highs.

Coal benefits from global market By Johannes Jordaan - independent economist at Economic Modelling Solutions The world is in the middle of an energy crisis that started with supply constraints as a result of the Covid-19 pandemic. Increased demand when Covid-19 restrictions were lifted was further exacerbated as a result of unprecedented monetary and fiscal stimulus by central banks and governments to support economies. This resulted in a surge in demand and price increases in most commodities.

T he Russian invasion of Ukraine on 24 February caused further market panic and has led to sig nificant disruptions in the production and trade of commodities – especially in those com modities where Russia and Ukraine are significant exporters – as sanctions against Russian exports started piling up. A commodity that benefitted significantly from the increase in demand, supply disruptions and market panic, is coal; ironically during a time of increasing

global pressure and commitment to reduce its use. Coal remains the largest source of electricity genera tion and the largest single source of CO 2 emissions. Oil prices, and natural gas prices in Europe, that increased almost 600% year-on-year in March, have forced countries like Germany to reactivate coal plants putting further pressure on coal demand. In 2021 coal production failed to keep pace with demand, and coal shortages in China and India led to power outages and idle factories, putting pressure on prices. With increased demand and supply disrup tions, coal prices soared to new all-time highs, and Australian coal exports reached $435 per ton during March 2022. The price of Australian coal had already increased 284% year-on-year in October 2021 to a monthly average of $225 per ton. But just as prices started to settle down towards the end of 2021, supply disruptions and the war in Ukraine caused new market panic. The price of South African coal exports increased to an average of $200 per ton in October 2021 before pulling back to $128 ton in November 2021, but increased again to a monthly average of close to $300 per tonne during March 2022 after the invasion of Ukrainian. These prices are expected to result in higher electricity

Johannes Jordaan.

10  MODERN MINING  June 2022