Say what? Thermal coal is apparently the ‘biggest winner of the green revolution’
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Thermal coal sounds like it is as far as you can get from clean and green, but we found an expert who reckons it’s the “biggest winner in the green revolution”.
“Somehow the world’s come to the realisation that power does not come out of a plug,” Patersons Securities resources analyst Xavier Braud told delegates on the second day of the RIU Explorers Conference in Fremantle, WA.
Thermal coal prices have been on a tear since July 2018, gaining over 20 per cent by September before edging back. Prices are still up about 7 per cent over the past year.
“We still need to produce power somehow and good old thermal coal is a great reliable source of it.
“Of course, we have to be realistic, it might not last that long, but still it was an interesting one for the green revolution.”
Looking forward, Mr Braud sees nuclear as being the strongest contender as a substitute for coal-fired power.
“I come from France and I can only promote that,” he said.
“I was brought up with 70 per cent of my power coming out of nuclear power stations and I’ve got nothing wrong with it.”
Jokingly he says: “I’ve had my third arm cut off, it’s alright.
“But in terms of commodity we can see uranium probably playing a part in the near future,” he said.
Over the past 12 months, the best performing commodity has been palladium, with prices up 40.7 per cent.
In second place is iron ore with a 25.5 per cent gain, followed by gold with an 8.5 per cent increase and thermal coal with a 6.8 per cent rise.
The worst performing commodity over the past year has been cobalt, which has slumped 57.8 per cent.
That was followed by zinc, which dipped 26.5 per cent, lithium with a 25.3 per cent decline and lead after falling 20.8 per cent.
However, according to Mr Braud, “fundamentally copper is the winner of everything”, despite the price being having slid about 13 per cent over the past year.
“When you think about it all — technology, coal, nuclear, the old hydropower — you still need copper, lots of copper,” he explained.
“Turbines actually have copper coils, all of them and there’s nothing to replace it. The new technology needs more and yet the same deal – last 12 months, copper goes down.”
Copper supply is tightening due to global uncertainty and US-China trade tensions coupled with rising demand.
Most base metals have come under pressure since US President Donald Trump announced his wide-reaching tariffs on $US250 billion worth of products imported from China.
The trade battle has ignited fears in the market of weaker demand, prompting some already in production to pull back on supply.
At the same time, global copper inventories continue to decline.
Research group Wood Mackenzie sees the copper supply gap stretching to 300,000 tonnes this year and predicts that will drive the average annual price up to $US7050 per tonne.
Copper demand from electric vehicles (EV) is forecast to surge by 1.7 million tonnes by 2027.
The more electric a vehicle is, the more copper it needs.
According to UBS, the electric Chevrolet Bolt uses 80 per cent more copper than the similar-sized petrol-powered Volkswagen Golf.
The ICA says conventional petrol-powered cars contain around 9 to 22kg of copper, while a battery-powered EV contains something like 80kg and a fully electrical bus requires as much as 400kg.