Since the beginning of 2021, thermal coal indices in Europe have been in upward trend, exceeding 70 USD/t. Rising TTF gas prices, cold winter in a number of European countries, which contributes to an increase in coal generation, as well as a reduction in ARA coal stocks strengthened coal quotes this week.
Low daily temperatures decreased the capacity utilization of underground gas storage facilities in the EU to 65.75%, which is lower than the average estimate for the previous five heating seasons (66.13%). TTF gas indices reached 26.67 EUR/MWh (+8.63 EUR/MWh or +47.8% to Jan 06, 2021).
Some countries observe growing coal combustion volumes in December 2020: the share of coal in the energy mix of the UK amounted to 3.1 GWh or 7.1% compared to 3.1% in November 2020. ARA coal reserves remain at 2-year lows of 5.09 mio t. (-0.57 mio t or -10.1% to Nov 23, 2020).
However, high European carbon prices 33.55 EUR/t (+0.96 EUR /t or +10.1% to Dec 31, 2020) may limit further growth potential of the indices.
Due to delayed annual maintenance of railway lines by Transnet (postponed from January 9-18 to January 16-25, 2021) market participants seek to conclude contracts for the supply of South African material for February, supporting API4 quotes. Coal reserves at Richards Bay decreased to 3.09 mio t (-0.70 mio t to Nov 23, 2020).
An unexpectedly cold winter in the Asia-Pacific region boosts coal generation and demand for Australian thermal material, which had a positive impact on the indices. In addition, due to high prices for South African coal cement producers in Pakistan switched to cheaper thermal coal of Australian origin.
According to market participants, strict regulation of coal imports by the Chinese government was not efficient, as the restrictions led to an uncontrolled surge in the price of local coal. Nevertheless, the volume of coal imports for 2020 reached 304 mio t, which is almost in line with the government’s goal of maintaining volumes in the range of 277-299 mio t. Despite the ban imposed by the Chinese government on coal from Australia, China’s coal imports in December 2020 amounted to 39.08 mio t (+36.31 mio t compared to December 2019). This is the highest monthly figure since January 2014. Domestic coal prices in China rose to 154 USD/t FOB Qinhuangdao (+68.95 USD/t or +81% to the average price of September 2019).
Heavy rains in the southern provinces of Indonesia, as well as the growing demand of Chinese energy companies supported quotes of low-calorific material of Indonesian producers.
Limited supplies of metallurgical coal in China amid a new outbreak of virus in the steel-making province of Hebei strengthened the indices of metallurgical coal from Australia.
Source: CAA Analytics
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