Countries reached an agreement to gradually reduce the use of coal at the COP26 climate summit in Glasgow ended on November 13, although the language used in the final paper softened from "phase out" to "phase down", driving global mining stock prices lower. But tight supply situation this year has provided huge gains for the sector.
Shares of large global mining companies have fallen this week as countries at the summit reached the consensus that they would reduce coal use. By the close of trading on November 15, shares of China Shenhua and Yanzhou Coal were down 1% and 2.4% respectively on the Hong Kong Stock Exchange.
Shares of Indonesian miners, the world's largest coal exporter, also fell sharply as the rapid growth of domestic coal production in China exacerbated the decline in global coal prices. Shares of Indonesia's Bumi Resources fell 5.7% on the day, while shares of Indonesia's Adaro Energy and Indika Energy fell 4.5% and 7%, respectively.
Among Asian companies, shares of Korea Electric Power Corporation (KEPCO) fell more than 1%, while shares of Thailand's Banpu and Coal India fell 2.7% and 4.3%, respectively, due to poor quarterly results. Meanwhile, metallurgical coal producers were not spared, with South32 and Coronado Global Resources down 1.4% and 4%, respectively, on November 15.
However, current coal share prices are still much higher than they were at the beginning of the year due to the lucrative profits companies have made from a price surge.
"The reality is that coal will still be used for the next 10 years or so, which will continue to generate generous amounts of cash flow for companies," said Mathan Somasundaram, chief executive of Australian research firm Deep Data Analytics.
Overall, pledges at the climate conference that countries will accelerate their commitments to reduce carbon emissions have optimized carbon market trading rules. Economic growth opportunities will increasingly be driven by the clean energy transition, and the global transition will attract trillions of dollars in investment, which, combined with related measures such as fossil fuel subsidies, will drive the transition from fossil fuels to other energy sources.
(Writing by Alex Guo Editing by Tammy Yang)
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