Looks like, at this point in time, the whole world is scrambling for the same stuff the British were after almost a century ago. With countries ramping up domestic power capacity (coal-fueled) by some tens of Gigawatts, hundreds in China's case, to the already existing capacity, supply will get even more squeezed. And thanks to the recent extreme upscale of crude oil prices, we are all now fighting for the ultimate alternative: coal.
South Africa, one of the world's largest exporter of thermal coal, was hit by a devastating power crisis for the past few weeks, as coal-fired plants were running way beyond maximum capacity and literally couldn't handle the pressure anymore. The government is declaring an emergency which leads to closures of coal-delivery ports, halting exports to a crawl.
Indonesia, the largest single exporter of coal, can't off-take enough to satisfy the hunger as mines are already maxed out in production capacity. Bumi Resources, the largest Asian coal miner by asset size, corporate secretary, Dileep Srivastava, said in late January coal prices may well soar beyond the US$ 150 per tonne mark in the short-medium term time-frame.
The lack of infrastructural investments in railways and ports (so are heavy equipments such as barges and conveyers) around the world adds another heavy straw to the camel's back. Ships waiting to load, are backed up for months in Newcastle, Australia's biggest coal-loading port, which worsens matters and shows problems are not likely to dissipate in the near future due to the prolonged bottlenecks. Floods in the country (Australia plays a pivotal role in the coal supply chain as it currently holds the number two position in total export volume) have also squeezed the already tight market and increased the demand for coals from regions like Western Canada. Grande Cache Coal, a miner based in Calgary, has doubled its share price in the past week alone, closing at US$ 3.30 on Friday, Feb 8th.
Adding insult to injury, China is experiencing the worst winter in 50 years. Snow-blanketed roads and highways make it impossible to transport coal from the northwestern states of the country (that's where most of the coal deposits are) in time to supply China's 80% of power plants that run entirely on coal. Power coal supplies fall eerily to an all-time low of 4 days, where the suggested threshold level by the government is 3 weeks. China has also cancelled, and broke contracts, coal shipments to Japan and South Korea, who were obviously enraged by Wen Jiabao, the Chinese Premier's public statement to cut its exports entirely to those countries (in effect, China is halting all coal exports to every other country) starting early February. On receiving the news, the heads of state of the two countries scurried to get their hands on future binding contracts from Indonesia or India, and my guess is, with limited results.
In a related story, the world's largest miner, BHP Billiton, has upped the ante in an attempt to takeover long-time arch-rival Rio Tinto, part of the reason was to increase its stake in coal deposits. The acquisition, if successful, would bring about the largest coal deposit owned by a single company. The almost hostile bid came amidst surging coal prices, with Rio Tinto asking a far above premium to the current stock price.
In a related story, the world's largest miner, BHP Billiton, has upped the ante in an attempt to takeover long-time arch-rival Rio Tinto, part of the reason was to increase its stake in coal deposits. The acquisition, if successful, would bring about the largest coal deposit owned by a single company. The almost hostile bid came amidst surging coal prices, with Rio Tinto asking a far above premium to the current stock price.
