Finance

Coal mines benefit from energy market turmoil

China’s sharply increasing demand for electricity is also driving demand for coal. So much so that the state mines in that country have been ordered to continue producing at full capacity for the rest of the year, even if that means exceeding quotas. All the coal that will be extracted from the ground in the United States next year has already been sold.

Shareholders of coal companies benefit

In Europe and northeast Asia, among others, utilities are switching to coal to avoid skyrocketing gas prices. And that’s not all, writes the Financial Times (FT). There is less and less scope in the supply of coal as coal mines close and banks, among others, refuse to finance the opening of new mines.

As a result of all these developments, a small group of coal-producing companies are currently sitting on roses. Glencore, Exxaro and Thungela: they all see their stock market valuation rise. Analysts in the FT predict that they will post bigger than usual profits next year, and their shareholders appear to be benefiting.

The challenge facing coal producers and their investors is what to do with the huge profits they are now reaping. The big question they face: how long will this strong demand last?

You have to keep two things in mind, says energy expert Hans van Cleef of ABN Amro. “On the one hand what time horizon you are talking about, on the other hand what part of the world you have in mind. India, China and South Africa have many of their own mines. Switching to gas first in the transition to sustainable energy would not be an option for them. desirable, even if the climate would be good.”

We may want to switch to sustainable energy more quickly, but that doesn’t happen overnight, he says. “If you want to build a wind farm, it will take you seven years. And you need quite a bit of that to replace a coal-fired power station. So we are still dependent on gas and coal for a while.”

Especially emerging countries in Africa and Asia, says Van Cleef. “But you also see the demand for coal rising again in Germany, because they are closing the nuclear power stations there. It seems logical to me that coal companies will benefit from this in the coming years.”

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