The coal market saw mixed trends: in Europe, thermal coal indices hit a low since May 2021, falling below 89 USD/t; in South Africa, quotations dropped to below 80 USD/t amid weak Indian demand; in China, prices remained at 99 USD/t because of holiday closures; Australian 6,000 coal held above 104 USD/t, while HCC metallurgical coal firmed above 192 USD/t.
European thermal coal indices hit a fresh low since May 2021 on Wednesday, falling below 89 USD/t. The decline in coal quotations occurred despite rising prices in electricity, gas and CO2 markets, on the back of colder weather in Europe, as well as news that Ukraine might need to ramp up gas imports this winter. Another reason for the drop could be an oversupply of Colombian and South African material.
Coal stocks at ARA terminals in Europe dropped to 3.2 mio t, declining by 1% over the week and by 9% compared to the previous year.
South African High-CV 6,000 dropped below 80 USD/t (the lowest level since December 2020), mirroring the negative trend on the European market. A continuing factor of pressure is low demand from India, where many buyers are on holiday for national celebrations. Bid and offer prices for November deliveries were at 78-83 USD/t FOB, while the range for December deliveries was around 78-84 USD/t FOB.
Demand for imported material from Indian consumers remains subdued after the monsoon season. The fall in sponge iron prices over the last three months remains a negative factor, putting pressure on purchases of imported coal by small producers.
A steady flow of South African and Indonesian coal led to a modest increase in stocks at Indian ports to approximately 12.2 mio t as of October 03, compared to 11.9 mio t on September 12.
Traders’ offer prices for South African 5,500 NAR from east coast ports fell by an average of 1.70 USD/t over the week to 89-92 USD/t (plus VAT and truck or rail loading costs). Offers for similar material from west coast ports lost an average of 2.3 USD/t and fluctuated within the 91-92 USD/t range. Similar declines were observed for Indonesian Medium-CV coal.
Because of a series of national holidays (Durga Puja festival and Gandhi Jayanti), industrial activity slowed down, leading to an 11% contraction in coal-fired generation (w-o-w). Economic activity is expected to recover by the end of the month (after the Diwali festival celebrations on October 20).
In China, spot prices for 5,500 NAR coal at the port of Qinhuangdao stood flat at 99 USD/t. Activity on the Chinese thermal coal market was minimal because of state holidays for National Day (October 01-08).
Market participant sentiment was mixed. Some traders anticipate a pickup in demand after the holidays on account of the need to replenish stocks for winter. In their view, limited availability of spot supplies at northern Chinese ports could support prices. Others were more pessimistic, pointing to sluggish industrial demand even during the peak production season, which could continue to pressure the market.
On Thursday – the first working day after a week of holidays – thermal coal prices in China’s main mining regions continued to decline amid rising inventories. Price drops at mining sites reached 3 USD/t. Power plant consumption decreased to a seasonal low, and demand from non-power consumers plunged to a minimum level, given stockpiling before the holidays and reduced production activity during the holidays.
A potential factor for further price pressure in the mining regions could be maintenance work on the Daqin railway line from October 07 to 26, which will reduce the volumes of coal transported to ports, thereby exacerbating the supply surplus in the regions.
Activity at loading ports remains low, with most market participants still adopting a wait-and-see stance.
Indonesian 5,900 GAR stood at 77 USD/t (flat w-o-w), while the price of 4,200 GAR edged down to 43.2 USD/t.
Market activity in Indonesia was subdued: traders were awaiting the return of Chinese buyers. Meanwhile, suppliers tried to maintain offer levels at a stable or higher level because of weather-related restrictions hindering deliveries.
Australian High-CV 6,000 remained at last week’s level, above 104 USD/t. Spot demand for high-CV Australian material remains low among buyers in the Southeast Asia region, while facing competition from Indonesian 6,000 NAR.
Three deals were concluded last week on the global Coal platform. Two of them were for November delivery at a price of 103.00 USD/t FOB, and another one also for November delivery at a price of 103.50 USD/t FOB.
Australia’s HCC metallurgical coal index firmed above 192 USD/t. Activity in the metallurgical coal market remained restrained throughout the week, caused by holidays in India and China.
On October 09, premium metallurgical material Peak Downs for November delivery was sold at a price of 191.8 USD/t, providing a slight upward push to quotations.
Source: CCA Analysis
