While Nigeria is afraid of any backlash from the international community, if it taps into its coal resource, which is described as one of the best in the world, Japan’s Nippon Steel Corporation has signed an agreement with mining and trading giant Glencore for thermal coal supply at $375 per ton.
This is likely one of the highest prices a Japanese firm has paid for the commodity ever, sources familiar with the deal told Bloomberg on Wednesday.
As coal prices are soaring amid a global energy crunch and bans on Russia’s coal exports in the West, customers around the world are paying record-high prices for coal and are using more coal as they switch from expensive gas, where the market is even tighter.
Nigeria holds 379 million tons (MMst) of proven coal reserves, thereby ranking 44th in the world. It has proven reserves equivalent to 1,961.4 times its annual consumption. This means it has about 1,961 years of Coal left (at current consumption levels and excluding unproven reserves).
Nigeria produces 50,706.26 tons (short tons, “st”) of Coal per year (as of 2016) ranking 61st in the world. Nigeria imports 243% of its Coal consumption (469,315 tons in 2016).
Enugu Coal mine had contributed greatly to the nation’s economy in the past before the federal Government jettisoned the development for oil.
It was also used to generate power supply for the Eastern region.
The price in the Nippon Steel-Glencore agreement for coal supply until March 2023 is three times higher than the price of similar supply deals signed last year, one of Bloomberg’s sources says.
Japan, a major importer of energy commodities, is looking to secure supply amid soaring coal and gas prices and utilities switching to coal from gas where possible to conserve gas. Japan is on the brink of an energy crisis as it is forced to tackle a combination of a weak local currency, the fallout from the Ukraine war, and summer heatwaves.
At the beginning of the summer, the Japanese government called on households and companies to conserve as much electricity as possible this summer, seeking to prevent blackouts as spare power reserve capacity is expected to drop to critically low levels. The nationwide energy-conservation effort will be implemented from July 1 to September 30, amid concerns that Japan’s power system may not handle demand in peak summer.
Companies and countries importing energy commodities face surging coal prices as Europe restarts mothballed coal-fired power plants to conserve gas with the high uncertainty over Russian gas supply. The global coal benchmark, Australia Newcastle Coal futures, hit $414 on ICE Futures Europe early on Wednesday, while coal futures for 2023 in Europe soared to a record high on Tuesday after Russia said it would slash gas supply to Europe again.