(CAA Analysis) A brief rally of thermal coal indices in Europe ended with quotes falling below 50 USD/t due to an increase in the EU carbon prices and chip gas.
European carbon allowance prices reached historical highs since 2008 – 30.08 EURO / t (+0.79 EURO / t by July 08,2020), reducing attractiveness of coal. A sharp downturn of gas indices on the TTF trading platform to 4.23 EURO / MWh (-1.39 EURO /MWh by July 08, 2020) limits the potential for growth in material prices.
The mining regulator of Colombia may postpone the resumption of suspended operations at Prodeco two mines for 4 years. The initiative arrived amid concerns over the need to modernize the mines. However, Colombian coal mine workers union Sintracarbon opposed the suggestion claiming that the real grounds for the move under discussion are low export prices.
A surge in the number of deals for the supply of South African material to Indian metallurgical and cement producers in September 2020 had a positive impact on the indices. Indian buyers are willing to book some volumes of import material before the expected spike in export prices after the country’s monsoon season ends in September.
Trade activity of Chinese consumers in ports that have not exhausted import quotas keeps Asian indices at the current level.
On July 11, 2020 during the meeting with the representatives of the National Development and Reform Commission (NDRC) Chinese government officials announced the possibility of easing coal import restrictions due to limited supplies of local medium-calorific material, lower performance of local hydroelectric power plants and the expected rise in power demand in the country by the end of summer 2020.
Chinese state-owned mining companies Yankuang Group and Shandong Energy Group are planning a merger that could create one of the largest players in the Chinese coal market. In 2019, Yankuang Group produced 166 mio t of material at its mines in the provinces of Shandong, Shaanxi, Inner Mongolia, and Australia. In 2020, the company’s production volumes may exceed 170 mio t. Shandong Energy Group produced 125 mio t in 2019. Both companies have subsidiaries in Australia that are also involved in the merger process.
According to market participants, the strict coal import policy for Australian coking material to China saps the demand of Chinese buyers for imported metallurgical coal, negatively affecting the quotes of coking material of Australian origin.
Source: CAA Analytics
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