Coal, once stable, zooms in price

You may not like it, but coal is high in demand.

Demand in China and a host of other factors are pumping coal prices to new levels, according to the Wall Street Journal.

As a result, coal prices could begin to push up the price of electricity, food, imports and other products that directly or indirectly rely on coal-burning power plants. (Coal supplies 40 percent of the world's electricity and roughly 50 percent of the U.S.'s electricity.) Demand is growing so fast that China in fact imported more than it exported in the first half of 2007 last year. Oil has already contributed to rising prices.

Thermal coal prices at Australia's Newcastle port, where much of the coal from that nation gets shipped, rose to $125 a metric ton in January, a 143 percent increase from a year ago, according figures from globalCOAL cited by the WSJ. Central Appalachian coal futures on the New York Mercantile Exchange have doubled in the same period.

The situation has been exacerbated by cold winters in some areas, mine floods, mine shut down and other non-recurring events. But there's no doubt demand is rising. Last week, we interviewed Greg Boyce, CEO of Peabody Energy, the world's largest coal mining company.

"Coal demand has just been extremely strong. The globe is short of energy and we serve every coal market in the world through our trading platform or producing platform," Boyce said. "Demand is far outstripping supply, prices have gone up over the last year in most major markets and it looks like it's going to be here for a while."

What are some of the other impacts? Profits will rise for coal miners, and clean coal companies like GreatPoint Energy and CoalTek will see increased attention.

 

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