Coal that is mined especially in Asia has suffered a price shock due to the coronavirus pandemic. In a short period of time, it cheapened by almost a quarter as demand for electricity in particular fell. And prices at lower levels seem likely to remain for a few more months.
According to analysts, there is little likelihood that demand for energy coal would increase any more significantly by the end of this year. The average price of coal has plunged to $50 a tonne, the lowest since 2016. This is a decrease of about one-third over the last year, with the vast majority of this slump going to the economic crisis triggered by the coronavirus pandemic or anti-epidemic by measures. And Asian loggers suffer the most.
Year-on-year demand for coal plunged by between 60 and 70 million tonnes, a decrease of about only 1.5 per cent, but it will take several years to return to pre-crisis levels. According to the International Energy Agency, global demand could reach 5600 million tonnes a year only within four subsequent years. This will most likely lead to a reduction in mining investment, as loggers will not want to maintain unnecessarily large capacities. If the demand for coal suddenly increases, we could also see a jump in the commodity, as the supply side will take time to respond to increased demand.
