World coal market overview – week 51

This week thermal coal indices in the EU have exceeded 66.0 USD/t, rising to their maximum since March 2019.

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The coal quotes gained momentum amid an increase in coal-fired generation in a number of European countries, a surge in TTF gas prices, as well as a reduction in ARA coal reserves.

In November, the volume of coal consumption by coal-fired power plants in Germany reached 7 GW (+15% to October 2020), which had a positive effect on coal prices. The reduction in European gas reserves due to the ongoing winter season spurred TTF gas quotes to 17.248 EUR/MWh (+2.832 EUR/MWh or +19.6% to Dec 09,2020), increasing demand for material.

News about a possible diversion of coal supplies from European to Asian markets after the Chinese government’s statement on the potential easing of import restrictions led to a decrease in ARA coal reserves to 5.1 mio t. (-0.3 mio t or -6% to Dec 09, 2020). Nevertheless, forecasted growth in the European wind output in December 1.145 GWh (+184 GWh or +19% to Dec 09, 2020), as well as high EU carbon prices 31.7 EUR/t (+2.8 EUR/t or +9.7% to Dec 01, 2020) may limit further growth of indices.

The demand of Indian cement companies, as well as growing business interest of Chinese coal-fired power plants amid recent ban of the Chinese government on coal imports from Australia, support South African coal quotes.

Apart from that, plans of the South African rail operator Transnet to conduct an annual 10-day maintenance of the railway line, connecting Richards Bay terminal and major coal deposits in South Africa, impact indices positively as well. 09-18 January 2021 coal supplies along the railway line will be temporarily suspended. Richards Bay material reserves decreased to 3.3 mio t (-0.1 mio t to Dec 09, 2020).

International mining company Anglo American plans to sell some of its assets located in South Africa by May 2023 as part of its strategy to reduce total CO2 emissions by 40% over 15 years. The mines in SA with an overall capacity of 15 mio t of coal per year can be sold at auction or transferred to Exxaro, with which Anglo American has a number of joint ventures in the country. In Q3 2020, Anglo American produced 16.5 mio t of thermal coal.

Heightened bidding activity of enterprises in some Asian countries at the beginning of the heating season, as well as a limited supply of Australian thermal coal due to ongoing works in the port of Newcastle strengthened quotes of material from Australia.

Despite the increase in coal production in China in November to 347.3 mio t (+2% by November 2019), a number of Chinese provinces limit energy consumption in order to prevent power outages.

Amid the ongoing heating season Chinese coal-fired power plants are buying more Indonesian material, stimulating growth in prices for coal from Indonesia. However, Indonesian producers fear that the saturation of the Chinese demand may lead to a drop in Indonesian coal indices in the medium term.

Lowering growth in Australian coking coal quotes results from a decrease in the demand of the construction industry for steel in a number of Asian countries due to the conservation of construction sites for the winter period.

According to the national bureau of statistics of China, in January-November 2020, Chinese steel mills produced 961.2 mio t of steel (+50.1 mio t or +5.5% compared to January-November 2019). In November steel production volumes decreased to 87.7 mio t (-4.5 mio t or -4.9% compared to October 2020). Average daily steel production in November was 2.9 mio t (-0.05 mio t or -2% compared to October 2020).

Source: CAA Analytics

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