It’s still summer in Poland. But winter is coming.
According to Reuters, outside the Lubelski Wegiel Bogdanka coal mine, people are queuing in their cars and trucks to stock up on coal.
Why; Because 3.8 million households in the country rely on it for heating in winter.
“This is beyond imagination, people are sleeping in their cars,” a 57-year-old man named Artur told Reuters. “I remember the communist times, but it never occurred to me that we could go back to something even worse.”
Following Russia’s invasion of Ukraine, Poland and the European Union embargoed coal imports from Russia. Although Poland produces coal, the country relies heavily on imported coal for much of its household heating.
Lukasz Horbacz, head of the Polish Coal Chamber of Commerce, tells Reuters the embargo has “turned the market upside down”.
“Up to 60% of those using coal for heating may be affected by energy poverty,” says Horbacz.
Despite ongoing efforts by climate activists to replace coal in energy production, black sedimentary rock is still in demand.
Making a comeback
Poland is not the only country that uses coal.
According to the International Energy Agency, carbon consumption is set to increase globally.
“Based on current economic and market trends, global coal consumption is projected to increase by 0.7 percent in 2022 to 8 billion tons, assuming the Chinese economy recovers as expected in the second half of the year,” the report said. IEA in a recent report.
“This global total will match the annual record set in 2013, and coal demand is likely to rise further next year to a new all-time high.”
The ILO notes that as the global economy recovers from the COVID-19 pandemic, global carbon consumption has already recovered by around 6% in 2021.
Analysts point out that the dynamics of coal supply and demand could lead to its glorious revival.
“Looking into next year into the northern winter with gas prices in Europe and gas supply availability, countries are turning back to coal,” Shaw and Partners senior analyst Peter O’Connor tells CNBC.
“And commission [of coal] it is tight. Why; Because no one’s capacity building and purchases will remain tight due to weather and COVID. So, this market will remain higher for longer, probably until calendar year 2023.”
Time to rethink carbon stocks?
To be sure, coal is no longer front-page news in the investment world. In fact, the only ETF focused on coal — the VanEck Vectors Coal ETF (KOL) — ceased trading in December 2020.
But the industry is far from dead.
Alliance Resource Partners (ARLP), a diversified steam coal producer and marketer to major U.S. utilities and industrial users, recently increased its cash distribution to investors by 14%.
The stock is also up 91% year-to-date, in stark contrast to the broad market’s double-digit decline.
Another example is Peabody Energy (BTU), a St. Louis-based coal producer. The company’s products are essential for power generation and steelmaking. Its shares are up 107% in 2022.
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