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Coal Prices Reach New 2016 Highs amid Surging Asian Demand, Supply Disruptions

July 7, 2016 at 18:09 by Andrew Moran

Surging demand and mining cuts have helped thermal coal prices rise to new 2016 highs.

Thermal coal prices spiked 10% this month to a fresh 2016 high Mickey Mouse Bounce House of $58.70 per tonne on Tuesday. This beats the previous 2016 high of $56.50 per tonne. Analysts warn that increasing coal prices will not last because of gradual weakness in global demand stemming from tepid economic outlooks.

One of the reasons why coal prices are soaring is because of supply disruptions in places like Colombia and Indonesia. The other reason is that Asian jurisdictions, particularly South Korea, are amplifying their coal imports. Since the beginning of July, South Korean utility organizations have ordered more than 1.2 million tonnes of coal, which are scheduled for delivery between August and December.

South Korea is presently the world’s fourth-largest importer of thermal coal. In total, South Korea has imported approximately 10 million tonnes this year, and has ordered an additional 2.3 million tonnes until 2018.

Meanwhile, Japanese coal imports continue to remain steady. China, though, has already pledged to reduce its coal production capacity by 500 million tonnes for the next three to five years as part of measures to combat horrid pollution levels. Despite the good intentions on the part of China, investors are seeing this as a way to actually help boost coal futures.

Ultimately, excluding Asia, overall coal demand continues to be weak because of sluggish economic growth and an international transition into green energy. It was reported last month by the Energy Information Administration (EIA) that coal used to generate US power declined in April to its lowest monthly level since 1978 as the country shifts to natural gas, nuclear power, and alternative forms of energy, like wind and solar.

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