Coal India Share Soars as Middle East Conflict Disrupts LNG Supply

The share price of the state-owned coal mining company Coal India rallied amid a looming energy crisis linked to the tension in the Middle East.

Coal India is up by 5.28% in the past 5 days and 4.53% in the past month. At the time of writing, the stock is trading for ₹ 451.40, up by 3.73% from the previous close of ₹435.15.

Demand Shifting from LNG to Coal

Coal India’s price rose as the geopolitical tension in Iran drove up the price of coal used in power generation. Investors anticipate rising demand for coal because of reduced natural gas supply from major exporters in the Middle East. Market participants believe that the demand for gas will shift to coal amid fears of supply shortage. 

The conflict already disrupted the liquified natural gas (LNG) shipments from the UAE and Qatar, which account for about 20% of the global supply of LNG after Iranian forces closed the Strait of Hormuz, which serves as a major route of gas shipments.

Qatar’s state-run energy firm QatarEnergy, the world’s largest LNG producer, also halted production after drones attacked its facilities in Ras Laffan Industrial City and Mesaieed Industrial City.

Higher Coal Prices Because of Gas Supply Shortage

Analysts said that losing QatarEnergy’s LNG could have dire consequences on the energy market. 

“Nothing can make up for the loss of Qatari LNG,” said investment bank MST Marquee’s head of energy research Saul Kavonic, according to the Financial TImes. “If the shutdown is prolonged, or worse the LNG infrastructure is damaged, it portends a larger gas market shock than in 2022 when Russia turned off pipeline gas to Europe. Gas prices could retest their record highs set in 2022.”

According to wealth manager UBS, coal power generation could increase when gas becomes expensive due to lack of LNG supply. This will drive up demand and increase the price of thermal coal.