Thermal coal is on fire.
Thermal coal has been reduced to an energy pariah because the power plants that use coal to generate electricity emit massive amounts of carbon that contribute to climate change.
The political and environmental agenda for the world’s energy future is being constructed on top of abandoned coal mines and shuttered coal-fired power plants.
However, coal is having a resurgence. Prices are reaching historic highs and coal companies in the U.S. and around the world are struggling to meet the increased demand.
There are several reasons for the dramatic shift:
First, the Russian invasion of Ukraine has destabilized the global coal market. Russia is the third largest exporter of coal. Trade sanctions have not included Russia’s energy production, but some countries are become squeamish about buying their coal anyway.
The energy research and consulting firm Wood MacKenzie reports that buyers are also concerned that restrictions on Russian banks and a “deterioration of rail transport availability” will threaten promised deliveries.
Second, the global demand for coal to supply energy has been on the rise for months as the world has emerged from the pandemic and economic growth has surged. That is particularly true in Europe, where increased reliance on alternative fuels left countries unable to meet energy demands, forcing them to return to coal.
The increased demand has sent export prices spiraling upward.
Normally, the average price for a ton of export thermal coal from the United States would be about $150, but it reached over $400 last week. “These prices are absolutely off the charts,” James Stevenson, a coal analyst for the Oil Price Information Service,” told Climatewire. “This means people are really desperate for prompt coal delivery.”
But delivery is a problem, especially for West Virginia.
This state has lots of hot burning, lower sulfur coal that is in demand, but coal companies cannot get it to market. Rail service is backed up and the primary exporting port for West Virginia coal, the Curtis Bay Coal Terminal in Baltimore, has been slowed since December by a damaging explosion.
Jason Bostic, vice-president of the West Virginia Coal Association, said the shipping issues mean coal operators in the state cannot capitalize on the record high prices. “The fact that we can’t get that coal into the export market is frustrating our operators all to hell,” he said.
Coal has been a convenient whipping boy for years now. The global environmental movement has worked tirelessly to bankrupt the coal industry to fulfill its vision of a planet where alternative fuels power energy efficient homes, businesses and factories.
That utopian vision failed to account for demand outstripping supply and a European war. And now, when an energy crisis hits, the world again turns to coal.