Coal Prices Fall, Trump's Assistance Lacks Impact

Coal prices weakened after a recent spike. According to Refinitiv, the price of thermal coal for July contracts closed at US$147.05 per tonne on Thursday, down 0.64%. This decline contrasted with a 2.21% surge on Wednesday. Coal prices fell in tandem with weakening global oil prices. Coal and oil are commodities that influence each other as substitutes. Oil prices fell around 3% on Thursday following reports that United States President Donald Trump was reluctant to pursue a full-scale war with Iran, despite ongoing clashes. West Texas Intermediate crude oil futures fell 3.1% to close at US$93.04 per barrel, while Brent crude, the international benchmark, weakened 2.8% to US$95.03 per barrel. Coal prices remained weak despite positive news from the US. Trump announced the use of a Cold War-era act to disburse US$700 million for various coal projects. The move is his latest effort to boost the use of coal, the most polluting fossil fuel. Trump stated the funds would be used to maintain operations at over a dozen coal-fired power plants across 10 US states and 42 coal mines, as well as to build two new plants and one coal export terminal. The funding will be channelled through the Defence Production Act, which was enacted in 1950 and grants the US president emergency powers to regulate and support domestic industries deemed crucial to national interests. Despite Trump’s continued push to revive the coal industry, the sector continues to shrink. US coal output is currently less than half of its 2008 level, while the number of mining jobs has fallen by more than 90% compared to a century ago. Natural gas and renewable energy are considered cheaper and increasingly dominate electricity supply in the US. Meanwhile, reports from China indicate that thermal coal prices at northern Chinese ports are stabilising after previously strengthening due to supply disruptions. The market’s focus is now shifting from supply concerns to demand uncertainty. Coal supply is beginning to recover as mines that were temporarily disrupted resume operations after passing safety inspections. Coal inventories at ports remain relatively high, reducing market confidence that prices will continue to rise. Sellers are reluctant to cut prices too deeply as the peak summer electricity consumption season approaches. On the other hand, buyers are also hesitant to make large purchases because their existing stockpiles are still ample.