Lower gas indices, growing wind generation volumes as well as high prices for EU carbon quotas weakened European thermal coal indices below 68 USD/t this week. Warm weather in a number of EU countries had a negative impact on TTF gas indices 18.72 EUR/MWh (-6.19 EUR/MWh or -24.8% to Jan 13, 2021).
Growth in windmill generation to 2424 GWh (+644 GWh or +36.2% to Jan 13, 2021) limited coal demand from local thermal power plants. Expensive European carbon quotas 32.82 EUR/t (-0.73 EUR/t or -2% by 13.01.2021) may offset the price advantage of coal over gas, thereby putting further pressure on coal indices.
Due to high prices for South African thermal coal, some Indian cement companies limited coal imports, depressing the quotes to roughly 87-88 USD/t. Apart from that, surge in production volumes of the Indian state-owned company CIL increased the availability of coal on the domestic market of India, negatively impacting prices for imported material.
Strong demand for Australian thermal coal amid a cold winter in the Asia-Pacific region supports Australian coal quotes at the current level.
The National Development and Reform Commission of China issued a decree according to which local coal producers should maximize production in the near future and continue to operate during the Chinese New Year holidays in February.
Local mining companies fear that this policy may lead to a rapid surplus of material on the domestic market and affect prices. However, Chinese traders believe that the demand for coal is many times higher than the current supply, so the average price on the domestic market will remain the same.
According to South Korean customs statistics, owing to strict environmental policy, capping carbon emissions, most Korean thermal power plants were underutilized during 2020, which led to a drop in the country’s imports of thermal coal to 11-year low of 87 mio t (-16 mio t or -16 % to 2019).
Continued rains in the coal-producing provinces of Indonesia limit the production volumes of local coal miners, supporting the prices of low-calorific material of Indonesian origin.
A number of contracts between Indian steel mills and Australian coking coal producers with a supply in February and March strengthened quotes of metallurgical material. Due to the looming tropical cyclone in Australia, some market participants are also buying metallurgical coal with urgent delivery.
Source: CAA Analysis
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