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Tag: ARA coal
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World coal market review – week 30
Last week, thermal coal indices in Europe continued their rally over 140 USD/t. The gas shortage in the EU, due to unplanned maintenance at the Norwegian gas field increased the TTF gas quotes to the record highs of 40.6 EUR/MWh (+4.5 EUR/MWh to July 21, 2021) and strengthened coal prices. ARA coal stocks are at the level of 4.6 mio t (-0.3 mio t to July 21, 2021). Higher demand for electricity in a number of European countries, owing to hot weather, provided additional support for coal prices.
South African coal indices, hitting multi-year highs, edged below 130 USD/t amid the drop in demand from Indian enterprises and the completion of scheduled maintenance of the railway (July 20-26, 2021), connecting the coal-producing provinces of South Africa and the port of Richards Bay. According to experts, quotes of coal from South Africa may continue to rise in the short term, due to additional supply constraints, caused by railway operator Transnet’s plans to resume repair works in August.
The prices for 5500 kcal/kg NAR coal of domestic production in the port of Qinhuangdao exceeded 160 USD/t amid typhoons in China, suspending work of the ports in Shanghai, Zhoushan and Ningbo. Heavy rains in eastern China caused a decrease in average daily temperatures, resulting in reduction in electricity demand. According to experts, new heat waves will strike China in mid-August.
Despite the heightened trading activity of Asian buyers, Australian coal indices, which are at the level of historical highs since 2008, declined below 160 USD/t following the price correction.
The closure of a number of mines due to the deteriorating epidemiological situation in Indonesia and, as a result, a reduction in supplies, supported Indonesian 5900 GAR coal quotes over 120 USD/t.
Shortage of Australian coking coal supplies to the Asia-Pacific market, caused by planned maintenance of some Australian mines, supported prices of coking coal from Australia over 215 USD/t.
Under the experts, this year global steel production may reach new record highs due to the increase in production volumes after the COVID-19 pandemic. In H1 2021, Chinese steel mills produced 563 mio t (+12% compared to H1 2020). According to the forecasts of the World Steel Association, in 2021 the total volume of the world steel output may exceed 2 billion t.
Source: CAA Analytics
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World coal market review – week 28
Last week, coal prices in Europe climbed to their highest level in a decade, exceeding 135 USD/t. Limited supplies of the material and rebounding electricity usage amid heat waves in a number of EU countries lifted coal demand. TTF gas indices increased to 34.4 EUR/MWh (+2.0 EUR/MWh to July 07, 2021), which has a positive impact on coal prices. Low wind output in the EU at the level of 870 GWh (+200 GWh to July 07, 2021) contribute to the growth in coal quotes. ARA coal stocks totaled 4.7 mio t (-0.05 mio to July 07, 2021). The situation in South Africa indirectly provides additional support to world coal prices (see below).
On July 14, 2021, the European Commission presented a large-scale program “Fit for 55” to combat climate change. Its goal is to reduce CO2 emissions in the EU till 2030 by at least 55% compared to the levels of the 1990s.The proposed measures are designed to cut emissions in all segments of the European economy, including electricity generation, the automotive and housing industries. One of the key points of the reform is the introduction of a cross-border carbon regulation mechanism, which provides for levying fees on imported EU goods depending on their carbon footprint. As part of the first three-year stage of the mechanism beginning in 2023, the import of steel, cement, fertilizers and aluminum will be subject to fees. The program is awaiting approval from the European Parliament and the EU Council.
South African coal prices continue to grow above 120 USD/t amid limited supplies of the material to the international market. On July 13, 2021 civil protests in South Africa, caused by the detention of former President Jacob Zuma, led to the complete suspension of the port of Richards Bay and forced the railway operator Transnet to declare a force majeure. On July 14, 2021, shipments from the port of Richards Bay resumed, but in a limited mode against amid strict security measures. According to experts, restrictions on the transportation of coal by rail and export from the port will remain for most of the month due to the unrest in the country, the recent accident on the railway line connecting the coal provinces of South Africa and the port of Richards Bay as well as scheduled maintenance of the railway within July 20-26, 2021. Richards Bay coal stocks decreased to 3.3 mio t (-0.1 mio t to July 07, 2021).
The prices for 5500 kcal/kg NAR coal of domestic production in the port of Qinhuangdao remain at the level of 150-152 USD/t. The limited supply of thermal coal in the domestic market of China and the growing demand for electricity support the indices. On July 11, 2021, Henan province suspended shipments of coal due to the flooding of railways. The authorities expect an increase in electricity consumption since in many regions of China the average daily temperature exceeded 37 degrees.
Speculations in the paper market decreased the price of Australian thermal coal below 145 USD/t. According to experts, Australian coal quotes, hitting multi-year highs, may continue to grow due to the shortage of high-calorific thermal coal in the Asia-Pacific market.
The suspension of a number of mines owing to the deteriorating epidemiological situation in southern Indonesia reduces the volume of coal production and exports, supporting the indices over 102 USD/t.
Seasonal demand for Australian coking coal from metallurgical plants in the Asia-Pacific region amid a want of imported coking coal in the region had a positive impact on the dynamics of Australian coking coal prices above 210 USD/t.
Source: CAA Analytics
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World coal market review – week 22
European thermal coal indices continued their rally last week, exceeding 100 USD/t. TTF gas prices rose to 26.2 EUR/MWh (+0.8 EUR/MWh to May 26, 2021). EU carbon prices reached 51.4 EUR/t (-1.4 EUR/t to May 26, 2021). Wind output in the EU countries dipped to 834 GWh (-386 GWh to May 26, 2021), providing additional support to coal quotes. ARA coal stocks amounted to 5.0 mio t (+0.4 mio t to May 26, 2021).
On May 29, 2021, Colombian coal producer Cerrejon announced the gradual resumption of mining operations after lifting the blockade on the railway, connecting coal-mining regions of Colombia and the port of Bolivar.
Stronger electricity demand during summer period in the Asia-Pacific countries boosted prices of South African material over 110 USD/t.
Last week, the domestic market of China saw an increase in coal prices due to high demand for electricity amid hot weather. As of June 02, 2021, the prices for 5500 kcal/kg NAR coal in the port of Qinhuangdao surged over 140 USD/t.
The growing demand from Japan and South Korea had a positive impact on the Australian coal indices over 120 USD/t. Taiwan also ramped up its consumption of Australian coal due to hot weather and power outages.
Ahead of the summer season, Japan will increase its electricity generation from May 31 till June 6. It is expected that the generation capacity of thermal power plants in Japan will increase by 4 132 MW, of which 650 MW will account for coal-fired power capacities.
On May 30, 2021, the Japanese company Tohuku Electric resumed power generation at the Haramachi 1 coal-fired power plant, which was suspended after the earthquake in February 2021.
On May 29, 2021, a fire at the Shin-Kori 4 nuclear power plant with a capacity of 1.4 GW led to the shutdown of the nuclear power plant, boosting the volume of imported coal burning.
Despite the correction of quotes, strong demand from China and India goes on keeping the prices of Indonesian 5900 GAR material above 96 USD/t.
Indonesia plans to reduce the share of coal in the country’s energy mix to 30% by 2025 and double the share of renewables from 11.2 % in 2020 to 23% by 2025. The country also plans to suspend the construction of new coal-fired power plants in order to reduce CO2 emissions. This measure may limit coal consumption on the Indonesian domestic market in the long-term period.
Surge in steel prices had a positive impact on the demand of metallurgical plants in the Asia-Pacific region for coking coal from Australia, increasing prices over 160 USD/t.
Source: CAA Analytics
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World coal market brief overview | Week 28
(CAA Analytics) World coal market: brief overview – week 28
Surge in trading activity in the paper market, the expected recovery of pre-crisis EU power demand and strengthening gas quotes drove coal prices up in Europe this week. The projected growth in the average level of power demand of the 10 largest EU countries during Q3 2020 had a positive impact on European energy prices and coal indices. According to the analytical platform Gas Infrastructure Europe, the supply of liquefied natural gas to the European market in June 2020 decreased by 11% year-on-year, shoring up gas quotes. However, steam coal indices in Europe remain under pressure from abundant ARA coal reserves.
Amid monsoon season, Indian consumers began booking September supplies of high calorific coal from South Africa, boosting South African steam coal indices. However, due to increased freight rates and falling steel prices, Indian metallurgical companies refrained from purchases of mid-calorific material, weakening quotes of mid-calorific coal.
Low demand from Chinese consumers during public holidays in China (June 25-27) as well as import controls in the ports of Jiangsu and Guangdong provinces affected negatively the Australian coal price. Nevertheless, activity in the paper market is supporting index at the current level.
Sluggish Chinese and Indian demand depress quotes of imported coal from Indonesia. Attempting to reverse downward trend of material prices, Indonesian producers reduced supplies in H1 2020 by 37% year-on-year.
The limited supply of local coking material in China due to government safety checks at mines in Shanxi province and the exhaustion of quotas for imported metallurgical coal from Australia stabilized Australian coking coal indices.
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European prices slide on easing supply concerns
(Montel) European coal prices have retreated from last week’s multi-week highs as easing concerns of disruptions to Russian supply combined with relatively high stocks and waning demand.
The front-quarter API 2 contract traded last at USD 45.80/t, down 6% from a week ago, while the front year eased 3% to USD 53.90/t.
Russian exporter Suek declared force majeure last week after a bridge collapse halted all coal railings to the key northwest export port of Murmansk. But shipments should partially resume on 23 June, via a detour rail route, and Suek has been actively seeking alternative outlets for its exports.
“It seems the risk premium associated with the supply outage is now narrowing,” said a coal analyst with a European energy firm. She noted high stock levels in Europe and weak power generator consumption had largely offset concerns of reduced Russian supply. “On top of this, there could be volumes available for replacement from other major Atlantic coal suppliers,” she added.
“We can see some volumes being diverted from Murmansk to other ports, including to ports on the Black Sea,” said a source at the Taman bulk cargo terminal, in southwest Russia. And on the Baltic, a spokesperson for Riga port said it could also potentially handle Suek’s supplies, if required. “If Latvian Railway agrees with Russian Railway to divert additional cargo to Riga, we have full capacity to accept and process those volumes,” she said.
Guillaume Perret, director of consultancy Perret Associates, said the Murmansk disruptions could equate to a 3-4m tonnes reduction in supply to Europe and the Mediterranean region for the remainder of the year. “[But] the potential loss could be relatively easily replaced by additional supply from other Russian exporters, Colombian material and healthy stocks in northwest Europe,” he added.
Stocks at four main Amsterdam, Rotterdam and Antwerp (ARA) coal import terminals were seen last at 5.84m tonnes, albeit 1.5% lower on the week and a three-week low.
“So far there are still vessels planned to arrive from Russia and no cancellations,” said a source at one import terminal. He mainly attributed the lower stocks to weakening seasonal demand from utilities.“The Murmansk issue will only accentuate the downward trend of ARA stocks going forward,” said a dry bulk strategist with a trading house. “I expect ARA stocks will drop by more than 1m tonnes over the summer season,” he added.
Price floor
An analyst with a European coal trading firm said however further prices losses would be limited, while uncertainty about the situation in northwest Russia remained. “I think API 2 for the spot will remain above USD 40/t for a while, as I have seen no indications yet that Russian exports have managed to reroute in a meaningful way,” he said, also pointing to declining ARA stocks. “This gives us a short-term price floor, but if gas prices were to continue to fall then this may need to be readjusted.”
He also cited the bearish influence of sliding oil prices this week, which are relevant for coal production and logistics costs. The benchmark Brent North Sea crude contract has dropped more than 12% on the week amid renewed concerns about flagging global demand and as crude inventories in the US climbed to a fresh record high. “I think oil’s decline this week has driven down gas prices, which [in turn] has dragged down coal,” the analyst said.
Source: MONTEL
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