Over the past week, European thermal coal indices ranged between 124-127 USD/t, supported by higher gas and electricity prices. An additional factor was the increase in German coal consumption because of low wind generation and the high cost of gas, that resulted in clean dark spreads reaching the maximum since the beginning of 2024, while clean spark spreads remained in the negative zone.
Gas quotes at the TTF hub rose to 505.42 USD/1,000 m3 (+27.21 USD/1,000 m3 w-o-w). Market participants are concerned about the escalation of the conflict between Russia and Ukraine. Coal stocks at ARA terminals increased to 4.05 mio t (+0.11 mio t, or +3% w-o-w).
South African High-CV 6,000 held steady at 112 USD/t on the back of a rising trend in the European market and the opening of borders to exports via Mozambique. Meanwhile, some exporters are ramping up coal truck shipments to the South African port of Durban, avoiding Maputo, Mozambique, as risks of losing cargo and drivers remain high, given the possibility of outbreaks of renewed political protests.
In China, spot prices for 5,500 NAR coal at the port of Qinhuangdao lost 1 USD/t, easing to 117.66 USD/t. The quotations were pressured by above-seasonal temperatures, high inventories, as well as by mining companies lowering their offer prices by 0.7-2.8 USD/t, following a drop in sales, attributed to weaker demand from industrial enterprises and traders.
In addition, the authorities of Shanxi province (the second largest coal producing region) gave instructions to boost production in Q4 for reaching the target of 1.3 billion t by the end of 2024. Thus, despite high stocks, mining companies will operate at 110% of the agreed capacity by the end of the year. Moreover, at the beginning of the year, output was reduced at the request of the authorities due to safety concerns.
The China Development and Reform Commission (NDRC) released new guidelines that could lead to increased volatility in the spot market. Under the new directive, mining companies will be able to cut the amount of coal reserved for long-term contracts. Therefore, producers will be required to ship at least 75% of their mined volumes under long-term contracts in 2025 instead of 80% in 2023-2024 (although this initiative does not apply to major companies), while generating companies will be obliged to purchase at least 80% instead of 80-100% in 2024.
Inventories at the 6 largest coastal thermal power plants decreased to 14.47 mio t (-0.52 mio t w-o-w).
Indonesian 5,900 GAR strengthened to 93.8 USD/t on sustained imports from China, where consumption has increased at coastal thermal power plants as Indonesian material remains cheaper than local coal. Supply was also constrained by rainy weather.
Indonesian President Prabowo Subianto said the country will shut down all coal-fired power plants within 15 years by 2040, 10 years faster than the previously outlined deadline. The initiative was announced as part of his speech on the need for decarbonization on the sidelines of the G20 meeting on November 19.
Australian High-CV 6,000 edged below 140 USD/t caused by weaker demand in the Asia Pacific and rising competition from Colombia. As the yuan weakens, China is buying more Indonesian coal, while India is taking a wait-and-see attitude because of high inventories.
Australian HCC metallurgical coal index declined below 204 USD/t on poor demand as well as weak fundamentals, including low GDP growth and findings by market participants that China’s new economic support measures will not be aimed at stimulating domestic demand. Furthermore, speculation of a new round of coke price cuts in China persists. However, partial optimism remains in anticipation of restocking ahead of winter.
Source: CCA Analysis
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