A number of countries have begun to feel the impact of the recent heatwave, with a number of Asian countries such as Indonesia, Malaysia, the Philippines, Vietnam, Thailand, Myanmar and India currently battling high weather temperature of 40-48 degrees of Celsius. On the other hand, the increased weather temperature has subsequently led to the increase on the amount of coal used in power plants due to increased use of air conditioning.
Drought and hot temperatures have reduced water resources, causing power plants to reduce their capacity. Some of these countries, such as India, rely 75 percent of their electricity production on coal, while Vietnam is around 55 percent, Myanmar is 50 percent, and the Philippines is around 58 percent. This high demand can increase coal demand in the current period.
If demand increases, this could benefit Indonesia, which is the largest exporter of thermal coal. Currently, the heatwave has increased coal prices. On May 2, 2024, coal trading was recorded at its highest level throughout the year, touching US$148.25 per ton.
Previously, coal price spikes had occurred after a heatwave broke out and drought triggered an energy crisis in India and China. The price of coal in June 2021 was at the level of US$120, then increased to US$150 in July 2021 after China was hit by an energy crisis. The heatwave caused electricity use to increase sharply while electricity production from power plants decreased.
Meanwhile in India, in 2022 the electricity crisis catapulted the price of coal from around US$340 in April 2022 to US$400 in May 2022.
Before this heatwave occurred, Indonesia’s coal exports in Q1 2024 fell 25.9 percent to US$7.5 billion year-on-year (YoY). Meanwhile, India’s highest exports in the same period reached US$1.8 billion and China’s US$1.5 billion, followed subsequently by Japan and South Korea.
In addition, this increase has the potential to be even higher because demand will be higher in Q2 2024 due to the heatwave in Southeast Asia.
