China's Increased Production Drives Thermal Coal Prices Down to a Quarter of Their Four-Year High

Coal Prices Plunge to a Quarter of Ukraine War Peak
Steady Growth in Coal Demand Over Recent Years

Amid the global oversupply caused by increased production in China and other factors, prices for coal used in thermal power generation have fallen to their lowest level in four years. As of the publication date, prices are now a quarter of their peak at the onset of the Ukraine war in 2022.

According to the Financial Times (FT) on May 25 (local time), the benchmark price for seaborne coal used in thermal power generation surged to around $400 per ton during the energy security concerns following the outbreak of the Ukraine war in 2022. However, prices have since reversed course and recently dropped to around $100 per ton.

James Gavin General Coal-Fired Power Plant. Operating in Cheshire, Ohio. Photo by AP Yonhap News

FT reported that despite a global push for eco-friendly policies, coal demand has steadily increased in recent years, supported by rising electricity demand. During the period of soaring coal prices in 2022 and 2023, new coal mining projects were launched in China, India, and Indonesia.

However, as China, the world's largest producer and consumer, increased its domestic production, its import demand decreased.

Not only in China but also in India, the second-largest consumer, coal inventories have piled up, leading to continued market weakness. Some in the market predict that prices could fall further before summer cooling demand in the second half of the year gains momentum.

Firat Ergene of the commodity information firm Kpler stated, "At present, there are not many factors to support prices," and added, "Even if prices fall further, no one will step in to buy more because inventories are already high."

Alex Sacker of Argus, another firm, mentioned the possibility of a price recovery in the third quarter after further declines, noting that companies are responding to the current low price levels by reducing production in places like Colombia.

FT also reported that some expect summer demand to provide support for prices.

This content was produced with the assistance of AI translation services.