(Bloomberg) — Coal is seeing a dramatic spike in demand just as several major miners are hit with production problems, sparking a surge in prices from China to Europe and the U.S.
Prices for the dirtiest fossil fuel are soaring as sweltering temperatures in North Asia increase air conditioning needs, adding to already strong demand due to the industrial recovery from the pandemic. Mine safety issues in China and heavy rainfall in Indonesia, meanwhile, are constraining output.
The price spike comes amid an existential crisis for coal, with climate policies making it increasingly difficult to invest in new projects. The squeeze might not change that, but it’s providing miners with a windfall while it lasts.
“We could have strong prices into the fourth quarter,” said James Stevenson, lead researcher for coal, metals and mining at IHS Markit Ltd. in Houston. “But this isn’t structurally strong demand. You’re probably best optimized enjoying the higher revenue than investing it in new production.”
As is often the case with coal, the story begins in China, which mines and burns half the world’s supply. As the first major economy to rebound from Covid-19, factories there have been running hot for a while, and that’s recently been given an extra boost as the recovery takes off elsewhere.
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