Coal’s resilience today will prove its ultimate downfall: Gadfly

Newcastle, the Australian port that’s the biggest export harbor for thermal coal, is planning a shift away from the commodity that generates the overwhelming majority of its trade volumes. BHP Billiton Ltd., one of the world’s largest coal miners, is considering quitting the industry’s global trade body and perhaps the U.S. Chamber of Commerce because it can’t reconcile its policies on climate change and energy policy with their more coal-friendly stances. National Australia Bank Ltd. promised not to lend to new thermal coal projects, and ING Groep NV pledged to reduce its exposure to coal generators to close to zero by 2025. China Merchants Bank Co. joined the lengthening line of lenders disavowing advances for Adani Enterprises Ltd.’s Carmichael project, one of the largest such developments worldwide but one that’s highly unlikely to go ahead. South Korea, one of the world’s biggest coal importers, announced plans to phase out coal by 2079 and sharply cut its use by 2030. The International Energy Agency said that coal demand would remain essentially flat until 2022 — particularly striking given that in recent years it has tended to overestimate coal’s prospects.

You’d think from this newsflow that the main benchmark for globally traded coal would be wilting. In fact, it’s been on a tear.

Next-month Newcastle thermal coal futures bust through $100 a metric ton last week for the first time in more than a year, after rallying 39 percent since the start of June. For all the doom and gloom about the future of the black stuff — including from this Gadfly — the past two years have been a boom time for coal prices that’s only exceeded by their 2010 to 2012 peak.

That’s good news in the short term for coal miners like Peabody Energy Corp. and Glencore Plc, which have enjoyed rising profits from digging up soot. In the long term, though, it’s another nail in coal’s coffin.

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