"l understand the concerns raised by many households this winter about
the price of coal, and can appreciate the difficulties that price increases
may create, particularly for those who are unable to switch to an
alternative fuel supply.
Between 2005 and 2007, the
UK imported
between 70 and 75% of its coal
supply. Coal is an international^ traded commodity and
both
UK
coal and coal from other
countries is traded, broadly speaking, at the same world price, regardless
of the level of indigenous coal production. This global coal price will,
therefore, feed through into the price
of coal for
UK
consumption.
The global price for coal rose considerably until last summer
as a result of strong global demand for coal in the first
part of 2008, particularly with strong
consumption growth from Asian countries such
as
China and
India. This was coupled
with supply limitations, such
as
congestion at important exporting ports (notably in Australia), lengthening
trade routes, supply disruption owing to flooding in the Mid West of the US
and Australia, and other constraints in important producer countries like
Indonesia, Russia and South Africa all further
contributing to rising prices.
Since then, the global price of coal has fallen, although prices still
remain high by historic
Standards. This is a reflection of sliding oil prices leading to declining
freight costs (which make up a large share of coal prices), the global
financial crisis and falling demand,
particularly in the Pacific region,
as
well
as some
earlier overstocking in Western Europe. We would expect this Wholesale price
decline to feed through to retail coal
prices."
