The world’s least-liked commodity sees remarkable rally

LONDON — Soaring electricity demand, infrastructure woes and a surge in global gas prices have triggered an extraordinary rally for the world’s least liked commodity.

Australian thermal coal at Newcastle Port, the benchmark for the vast Asian market, has climbed 106% this year to more than $166 per metric ton, according to the latest weekly assessment by commodity price provider Argus.

The Newcastle weekly index, which stood at a 2020 low of $46.18 in early September, now appears to be closing in on an all-time high of $195.20 from July 2008. Its South African equivalent, the Richards Bay index, ended the week through to Aug. 13 at $137.06 per metric ton, up more than 55% this year.

To put thermal coal’s remarkable rally into some context, international benchmark Brent crude is one of few assets to have recorded comparable gains this year. The oil contract is up 33% year-to-date.

The resurgence of thermal coal, which is burned to generate electricity, raises serious questions about the so-called “energy transition.” To be sure, coal is the most carbon-intensive fossil fuel in terms of emissions and therefore the most important target for replacement in the pivot to renewable alternatives.

Yet, as policymakers and business leaders repeatedly tout their commitment to the demands of the deepening climate emergency, many still rely on fossil fuels to keep pace with rising power demand.

It comes shortly after the world’s leading climate scientists delivered their starkest warning yet about the speed and scale of the climate crisis. The Intergovernmental Panel on Climate Change’s landmark report, published Aug. 9, warned a key temperature limit of 1.5 degrees Celsius could be broken in just over a decade without immediate, rapid and large-scale reductions in greenhouse gas emissions.

U.N. Secretary-General, António Guterres, described the report’s findings as a “code red for humanity,” adding that it “must sound a death knell for coal and fossil fuels before they destroy our planet.”

Earlier this year, Guterres pushed for all governments, private companies and local authorities to “end the deadly addiction to coal” by scrapping all future global projects. The move to phase out coal from the electricity sector was “the single most important step” to align with the 1.5-degree goal of the Paris Agreement, he said.