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Third blow to China as thermal coal prices soar


First it was iron ore that soared, then coking coal, now thermal coal is riding a wave with prices reaching nine-year highs as China suffers once again from its trade ban with Australia.

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China has been hit with a double whammy. A heat wave has hit the country affecting its industrial provinces and electricity consumption has been pushed to unprecedented levels, forcing China to pay a premium for its coal.

Thermal coal prices are at about $US130 a tonne. Metallurgical coal (used in steel production) prices have recently soared above $US200 a tonne but in markets, like Canada and the US, that have moved in to fill the gap caused by the Australia ban, the price has risen to $US300 a tonne.

Adding to the demand in China was a drought in Yunnan province which has knocked out a major hydro electricity power station and output restrictions remain in place in Shanxi production hubs amid tighter safety inspections and environmental curbs.

Floods in Zhengzhou were curtailing coal moving from inland sources.

The hot weather was also boosting the gas price and electricity generators would soon be forced into restocking for winter demand.

Coal prices have risen almost 40 per cent since the beginning of May as warmer weather boosted demand in Japan, South Korea, and the United States.

The issue has pushed shares in New Hope Group above the $2 level, the highest price in about 18 months. Shares in Curragh mine producer, Coronado, were also rising and reached above the $1 mark. Stanmore and Blair Athol producer Terracom appear to be missing out on any benefit.

Analysts believe the increase in seaborne metallurgical coal prices that began earlier this year would continue for the rest of the year.

S&P Global Platts has reported a 279 per cent year-on-year increase in the spot transaction volume for the first half of 2021 for premium hard coking coal on an free-on-board Australia basis.



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