The conflict between Russia and Ukraine has sent thermal coal prices skyrocketing to new heights, as some European countries look to ban Russian coal.
The spot price for shipments leaving the Port of Newcastle in New South Wales soared to US$418 ($564) a tonne late last week, eclipsing the previous record of US$269 ($362) a tonne, which was set only four months ago.
It is a significant turnaround from 2020, when the price dipped below US$50 ($67) a tonne.
"$400 a tonne is just a crazy price for coal, we've seen it just literally smash through its last record high," David Lennox, a resources analyst with Fat Prophets, said..
"That was completely unexpected and it's all come at the end of what's been a very strong rally in coal prices over the last three or four months."
Russia supplies about 70 per cent of Europe's thermal coal exports and any ban will increase demand from other big exporters, including Australia.
Rory Simington, a coal analyst with Wood Mackenzie, says price is indicative of the very tight global supply of thermal coal.
He says Russia's exports "just can't be replaced in today's market".
"While some coal buyers will diversify, there are going to be a lot of other buyers that just continue to take it, basically because they have to.
"But even if there is only marginal extra demand for Australian or South African or Colombian coal, because the market was already so tight, any extra incremental demand could support high prices for quite some time."
Opportunity for Australian coal producers?
The amount of Australian coal being sold at US$400 a tonne is likely to be quite small given that most coal is sold under long-term contracts, although the contracts do often include escalation clauses.
Mr Lennox said most Australian producers would already be committed to contracts, given that recent demand had been so high.
"One would suspect the capacity here in Australia is becoming quite stretched, which would suggest that the ability to export more will be limited," he said.
"But if they can get those spot cargos away then yes, that's really where they do get that extra cream."
Poor long-term outlook
While high prices are good for coal producers in the short term, the long term picture is not as positive.
The shortage of global coal supply has in-part been caused by a lack of investment in coal production, as financial markets divest themselves of fossil fuels.
Mr Simington said the latest price high was unlikely to change that.
"Certainly, the high prices that we've seen over the past year will be getting people thinking, but I think there's still a lot of reluctance out there because the situation is so fluid and uncertain," he said.
"Some producers have actually said to us, 'Look, we wouldn't be making any investments in the current environment, until things settle down we wouldn't be doing anything'."
Mr Lennox said sustained high coal prices would significantly increase the costs of coal-fired power, which could hasten the transition to renewable energies.
"If the coal price does stay relatively high that shift is going to happen a lot quicker than the markets had been anticipating."
