Demand for electricity surges to lift thermal coal prices as Adani Group Australia starts production

In Australia, there is a rejuvenated demand for thermal coal. The country has recently given a go-ahead to new coal projects, including Kevin's corner coal mine, Adani Carmichael mine, Olive Down's coal mine, among others.

Thermal coal prices have soared to make it one of the best-performing commodity of the year. Thanks to the rising electricity demand, the market for thermal coal is widening again after the recent developments.The price of high energy Australian coal has surged by 86 per cent to above $150 a tonne. The country's coal prices remain the benchmark for Asian markets.

The thermal coal is burnt in power stations to generate electricity.It has traditionally been the most suitable source of energy for the coal sector, even with the demands of shifting to a cleaner form of energy.Although wind and solar energies are growing rapidly, it is not possible to keep up with the rising demand for electricity without coal.The recent price surge is testament to the need of coal-based energy for critical sectors around the world.

Moreover, thedestruction of hydroelectric dams in China due to floods has also boosted the demand for coal rapidly.The country's domestic coal supply is not enough to cater to its power requirements, which automatically forces China to import the coal.Although Indonesia is China's biggest overseas coal supplier, the persistent rainfall in the country ensured that the South Asian giant had to look somewhere else.

As a result, the coal prices have surged by a long way. In Australia, there is a rejuvenated demand for thermal coal. The country has recently given a go-ahead to new coal projects, including Kevin's corner coal mine, Adani Carmichael mine, Olive Down's coal mine, among others. However, the authorities would be keen to offer a conducive environment to the coal mine operators in the wake of increased demand.

Going forward, the global electricity demand is set to grow further by 5 per cent in this year and 4 per cent in 2022, according to the International Energy Agency. It also added that despite growing rapidly, renewable energy resources will only serve near about half of the net demand increase in 2021 and 2022.At this juncture, coal-fired electricity is projected to surge by 5 per cent this year, exceeding the pre-pandemic levels before growing a further 3 per cent in 2022.