Coal industry between a rock and a hard place – by Henry Sanderson(Financial Times – August 28, 2018)

Mining companies divided as investor pressure mounts while short-term gains entice

A push to reduce the development of coal mines along with increasing pressure from investors to divest from fossil fuels is creating a split in the mining industry between companies exiting the sector and those vowing to remain.

Deutsche Bank and Royal Bank of Scotland are among banks that have stopped lending for new coal mines, and spending on new projects has fallen 80 per cent from $10bn in 2012 to $2.2bn in 2018, according to analysts at Citi.

This trend, plus a government-led campaign in China to cut domestic coal supply to reduce pollution, has caused the coal price to almost double over the past three years to trade at $113 a tonne.

For those companies that are remaining, or even expanding their presence, the sector is a delicate balancing act for an industry that faces more investor scrutiny on its environmental record. Coal provides about one-third of the world’s energy but is a leading contributor to climate change.

“There’s a bifurcation in the market,” said Olivia Markham, a portfolio manager for the BlackRock World Mining Trust. “There is a growing pressure from the investor base and that voice is going to grow stronger over time. But if you’ve got a high-quality coal product — that’s quite a nice area to be in the market.”

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