TNB Fuel expects coal prices to stabilise in 6 months following Russia-Ukraine crisis

KUALA LUMPUR: Global coal prices have surged following the Russia-Ukraine war that has caused the power generation industry in Malaysia to be under pressure, said TNB Fuel Services Sdn Bhd (TNBF).

Its head (procurement and supply chain), Abdul Halim Othman said global coal prices are expected to stabilise within six months from March when supply and demand should return to some semblance of normality.

TNBF, which is a wholly-owned subsidiary of Tenaga Nasional Bhd (TNB), was established to ensure the sale of coal to independent power producers (IPPs) that have a power purchase agreement (PPA) with TNB is at an affordable price and at the required quality.

It is a non-profit organisation and its main focus is on the availability of coal to ensure the continuous operation of coal stations so that the electricity supply in Peninsular Malaysia is not affected.

“Sustainable electricity supply is a pillar of the country’s economic drive.

“When the economy stabilises, then the price will fall again as observed in previous years,” Abdul Halim told Bernama via email recently.

He said the good economic growth record in 2021 resulted in high demand and rising global coal prices in the second and third quarters.

Global coal prices declined again and stabilised in the fourth quarter of 2021, but it did not last long following Indonesia’s decision to temporarily halt coal exports in January 2022 to meet domestic demand.

He said Malaysia imported most of the commodity from Indonesia which was the main source of energy for electricity generation in the country.

“We can overcome the problem of the export ban because we have a relatively large stock which can last up to a month.

“The export ban lasted less than a month and it seemed that the situation returned to normal… (but) suddenly the Russia-Ukraine war broke out which caused prices to soar again,” he said.

Abdul Halim said TNBF is constantly monitoring the current market situation and is now in a challenging situation as it has to buy coal at a higher market rate.

“Demand for coal in Europe has risen sharply since the war due to a lack of gas supplies from Russia.

“Because there are restrictions, they have to use coal and we have to go through this wave (increase in coal prices),” he said.

Coal prices soared to a record high of over US$400 a tonne in early March 2022 and US$291.60 a tonne on April 8.

He said TNBF also has long-term contracts with suppliers that set coal prices for a one-year period to reduce the impact of sharp rises in coal prices.

In addition, TNBF has suppliers from several countries to ensure adequate supply to continue daily operations while reducing the risk of coal supply shortages, noted Abdul Halim. – BERNAMA