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Coal prices took a steep fall amid tighter Chinese environmental regulations and rapid transformation of major economies towards a zero-emission economy in respect to Euro 6 emission standards. The coal future prices on Chicago Mercantile Exchange (CME) dropped from its high of $78.05 marked on 29th October 2018 till $71.55 marked on 26th February 2019. The coal prices took a steep fall from $77.05 made on 21st January 2019 to $71.55 on 26th February 2019.
The recent court ruling by the Land and Environment Court in the state of New South Wales, Australia that dismissed an appeal against the ban on various coal projects, also marked an increase in the willingness of various governments to curb the harmful emissions generated by coal production and usage. In the recent status quo, Glencore, one of the world's largest coal producers decided to cap its coal business amid increasing pressure from investors in the event of raising awareness about the dire environmental impacts associated with coal production. The company's major rival, Rio Tinto (ASX:RIO) also took an exit from the coal business.
Per Lekander, a senior London Commodity Hedge Fund Manager at Lansdowne Partners expects demand to fall to almost zero if EU carbon emission allowances soar. As per the U.S. Energy Information Administration (EIA), the share of the U.S. total utility-scale electricity generation from coal will average 26% in 2019, down from 28% in the previous year and 24% in 2020.
The growing energy demand amid a recovery in global economic slowdown combined with Euro 6 emission standards is marking an increase in alternate energy generating sources such as renewable energy, gas, etc. and in turn exerting pressure on coal prices.
In the recent scenario, China restricted the access of Australia coking coal to its ports amid tighter environmental policy. The china stated that the measure to cut the import was mainly in line with the aim of curbing the pollution as it is carrying out risk monitoring and analysis on the quality and safety of imported coal. As per Wood Mackenzie, Dalian port, where customs banned Australian coal, accounted for 7% of seaborne coal import of China or 17 million tonnes last year.
Germany, under a plan agreed by a government-appointed commission, is now set to phase out all its coal-fired power stations by 2038. The move came in the wake of environmental concerns and coal dire impact on the environment. To promote the green transition, the special commission calls for Eur40 billion over the next 20 years to regions in Germany where coal mining and coal power still play a significant role. The action of the special commission would see Germany joining the global stance by various major economies to transfer towards a zero-emission economy.
The recent move of phasing out the coal powered stations has put an uncertainty over Datteln power plant in western Germany, which is capable of burning 400 tonnes of coal an hour.
The overall coal market seems to be pressure because of increased stance to curb global emission on the account of Euro 6 Standards by various significant economies.
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