KUALA LUMPUR: Global coal prices have surged following the Russia-Ukraine war and has caused the power generation industry in Malaysia to be under pressure, said TNB Fuel Services Sdn Bhd (TNBF).
Its head of procurement and supply chain, Abdul Halim Othman, said global coal prices were expected to stabilise in six months.
Supply and demand is expected to return to some semblance of normality by then, he said.
TNBF, which is a wholly owned subsidiary of Tenaga Nasional Bhd (TNB), was established to ensure the sale of coal to independent power producers, that have a power purchase agreement with TNB, is at an affordable price and at the required quality.
It is a non-profit organisation with its main focus being 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,” Halim said via email.
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 its coal from Indonesia. Coal is 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 had returned to normal, but suddenly the Russia-Ukraine war broke out. This caused prices to soar again,” he said.
Halim said TNBF was constantly monitoring the current market situation and was now in a challenging situation as it had 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. 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.
Halim said TNBF had 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, Halim noted. - FMT
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