Coal is lighting investors’ fires. The benchmark Australian spot price for thermal coal has surged to $70 a tonne, from just $51 at the start of the year. In Europe, the delivered price, including freight, has punched through $100 a tonne. Merger activity is buoyant, as are stock prices: shares in Shenhua Energy, China’s top producer, nearly doubled on Tuesday’s stock market debut.

With a month or so to go before miners and power companies kick off price talks negotiations – about half of sales are made at contract prices – dynamics are stacking up favourably for coal producers. Supply is capped by infrastructure congestion, most glaringly at Australian ports but also in South Africa. Indonesia, the biggest coal exporter, has fewer infrastructure bottlenecks but its coal has a lower calorific value. The growing number of power plants across Asia ensures robust demand. More than 75 per cent of planned new capacity in Asia outside Japan will be coal-fired. China, the biggest guzzler, uses nearly 40 per cent of global consumption. It expects to add 80GW-100GW of generating capacity a year until 2010, according to Morgan Stanley.