Coal Prices Strengthen, Driven by Electricity Consumption in India

Coal Prices Strengthen, Driven by Electricity Consumption in India

Coal prices strengthened at the close of trading last weekend. The price of coal futures for the September 2023 contract at ICE Newcastle Futures was observed to have risen 0.27% to a level of US$149.40/ton at the close of trading on Friday (25/8).

This coal price movement also occurred in the price of coal futures for the most active contract in October 2023 which rose 1.65% to a level of US$160.60/ton at the same trading time.

The coal price for the September 2023 contract reversed direction from the previous day’s trade which closed down 0.67% on 24 August 2023. Previously, coal prices were at the level of US$150.00/ton on 22-23 August 2023, or reached the level its highest in nearly 12 weeks.

Meanwhile, if you look at the movement throughout the year, the black gold price fell 63.03%. The price has also fallen 63.79% in the past year.

The strengthening of coal prices was influenced by the high consumption of electricity in India, as the second largest consumer after China, which reached a new high this summer. In addition, the accidents in China and Vietnam also pushed up coal prices.

According to Reuters , based on data from the Indian Power Grid Controller (GRID-INDIA), electricity consumption in Bollywood Country reached a record 223 gigawatts (GW) in June 2023, or up from its peak of 212 GW in June 2022. The total demand fulfilled reached a record 140 billion kilowatt-hours (kWh) in June 2023, up from 134 billion kWh in June 2022.

Although the controllers of the electricity grid have been able to utilize more power generation from renewable sources, power generation with fossil fuels also contributes to the fulfillment of electricity in India. It was recorded that electricity from coal-fired power plants increased by 3.3 billion kWh in June 2023.

At the same time, the Indian government has also prioritized increasing coal production to ensure fuel availability. During the first 6 months of this year, India’s coal production increased by 46 million tonnes, a 10% growth over the same period last year.

On the other hand, a safety accident in China as the world’s largest coal producer has reduced production at several coal mines. Analysts expect safety controls to be in place for the remainder of 2023 thereby limiting coal production in the country.

Furthermore, according to a report by the government newspaper Thanh Nien on Sunday (27/8), four people died in a coal mine collapse in the mining center of Quang Ninh, Vietnam. The newspaper did not give a reason for the collapse of the coal mine. However, this country which still relies on coal-fired power plants also killed at least 17 miners in the first nine months of 2022.

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