Last year, the biggest coal-mining companies globally raked in more than $97 billion in profits. This is quite a feat, especially based on the expectation that the coal industry was projected to be experiencing loses.
Data from S&P Capital IQ shows that the demand for fuel increasing globally is responsible for the tripling of coal profits in the 12 months ending June 30, 2022. Figures from the International Energy Agency show that in 2022, the demand for coal around the globe increase by 1.2% to set a new record.
Despite most countries pledging to stop using coal in favor of cleaner energy sources, energy security concerns caused by Ukraine’s invasion by Russia saw many revert back to this fuel as a source of power and heat. The European energy crisis and high gas prices also prompted a significant increase in the demand for coal. Last year, the average benchmark price for thermal coal in Europe was $295. This is double the price of the fuel in 2021 and almost four times higher than the fuel’s average price in the period between 2010-2020.
Companies that mine coal which is exported and traded globally have recorded bigger gains in comparison to state-owned miners who sell to domestic markets. Companies that raked in the highest profits were Glencore, whose earnings stood at $13.2 billion. In the 12 months ending on June 30, 2021, Glencore’s earnings stood at $1.2 billion.
China Shenhua also saw an increase in its profits, bringing in roughly $12.2 billion. BHP, which is the biggest producer of metallurgical coal outside China globally, raked in $9.5 billion. This figure represents a 3,200% increase, from the $288 million in profits that the mining giant recorded in the previous period.
Anglo American’s coal division also shifted from making millions in losses in the 12 months ending on June 30, 2021, to raking in more than $2 billion in the same period one year later. Anglo American is the fifth largest producer of metallurgical coal outside China. This coal is usually used in the manufacture of steel.
UBS analyst Myles Allsop stated that seaborne coal producers gained the most from the coal boom, noting that the war in Ukraine caused extreme tightness in the coal market. Allsop added that sanctions imposed on coal from Russia prevented the fuel from reaching the European market.
The improvement in the fortunes of coal mining companies comes just a year after the COP26 summit, where many pledged to phase out the use of coal. However, the energy crunch threw a spanner in the works, and as a result, coal producers such as Alliance Resource Partners L.P. (NASDAQ: ARLP) are enjoying a good spell on the international energy market.
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