By Rachel Morison, Weixin Zha, Ladka Bauerova and Mathew Carr
Bloomberg
Coal is suddently one of the hottest commodities in the world.
The resurrection may have further to run.
Prices in Europe have jumped to near an 18-month high, while Australia’s benchmark is set for the first annual gain since 2010.
At the start of the year, prices languished near decade lows because of waning demand as utilities sought to curb pollution and the International Energy Agency’s declared that the fuel’s golden age in China was over. Now, traders are weighing the chances of extreme weather hitting major producers and China further boosting imports as factors that could push coal prices even higher.
“It’s a commodity that’s been on a slippery slide for the past four years and it’s making a remarkable recovery,” said Erik Stavseth, an analyst at Arctic Securities in Oslo, who’s tracked the market for almost a decade. “There’s a strong pulse.”
What could light up the market further is the occurrence of a La Nina weather pattern. Last time it happened in 2010 and 2011, heavy rains flooded mines in Australia and Indonesia, the world’s two largest exporters. While some meteorologists have toned down their predictions for the weather phenomenon forming and having a lasting impact “another strong forecast” would cause prices to rise further, according to Fitch Group Inc.’s BMI Research.
La Nina systems can last for as long as two years, occurring when the surface of the equatorial Pacific cools, shifting weather patterns across the world. Named by fishermen in Latin America, La Nina is the “The Girl,” which often follows an El Nino, or “The boy.”
The Japan Meteorological Agency said this month that a La Nina has already set in and that there’s a 70 percent chance it will continue into winter. That contrasts with the U.S. Weather Service, which recently downgraded the chance of the event to 35 to 45 percent, compared with as high as 75 percent in June. Australia rates the possibility at 50 percent.
— Bloomberg
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