Despite environmental objections, coal-fired power generation still remains the most viable source of electrical energy. High oil prices coupled with increasing electricity demand, particularly in the Asian region, have seen a sharp rise in coal prices across all markets. At the same time, underinvestment in bulk carrier newbuildings due to very low freight rate returns, has led to capacity restraints, exaberated by congestion at some load ports. These, in turn, have fed back into higher freight rates, with the knock-on effect of increasing coal prices further. The Atlantic coal market remains strong as pricing from South African and Colombian producers remains above US$60.00/t FOB. Consumers are being forced to pay almost double the prices that were negotiated for Colombian coal for shipment in the fourth quarter last year. The increase in coal prices is clearly being driven more by strong demand in Europe and the US rather than any reduction in export volumes from South Africa and Colombia.
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