Jakarta, CNBC Indonesia – Coal prices are falling ahead of the Christmas and New Year holidays. In trading on Friday (22/12/2022), coal prices for the January contract on the Newcastle ICE Market closed slightly higher at USD 371.10 per tonne. However, the price was recorded down 0.24% in a week over week basis point to point.
Yesterday’s weakening continued the negative trend in coal, which fell 7.67% from this month’s peak but has risen 145% since the beginning of the year.
The plunge in coal prices was caused by warmer temperatures in Europe ahead of Christmas and a rise in COVID-19 cases in China. However, high demand from Germany prevented coal prices from falling too sharply.
Reported by Bloombergtemperatures across much of Europe will be mild this weekend into early January.
Warmer temperatures in Europe have dashed people’s hopes of seeing the White Christmas phenomenon this year. On the positive side, electricity demand will not increase and thus the pressure on energy prices will decrease.
Electricity generation from nuclear reactors in France is also projected to increase from 50% in November 2022 to 68%.
Europe’s gas supply has actually declined to around 83%, but with sluggish electricity demand and increased electricity generation from French nuclear reactors, worries about energy supplies have faded.
The rise in Covid-19 cases in China has also sent coal prices tumbling. China reported 2,722 more cases on Tuesday (20/12/2022), with a rise in Covid deaths worrying market players.
The surge in Covid cases has also forced some factories to shut down, thereby reducing demand for electricity and coal. The rise in cases has also cut the steel industry’s demand for coal in half.
The collapse in coal prices was slightly helped by the continued high demand from Germany.
Germany announced on Thursday (22/12/2022) that it would extend the operation of the coal-fired Uniper plant until at least March 2024.
This decision is questionable considering that Germany has pledged to abandon its dependence on coal. Coal production now accounts for a third of Germany’s electricity.
Several German companies are also turning to coal to fuel their factories, such as Steag GmbH. In December, pollution levels from power plants in Germany even matched South Africa and India.
“Everyone is sticking to emissions targets, but it has to be recognized that when faced with the dilemma of whether to keep the lights on or reduce carbon emissions, the choice is to keep the lights on,” said Carlos Fernandez Alvarez, head of the gas and the coal and electricity division at the International Energy Agency (VIA).
CNBC INDONESIA RESEARCH TEAM
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