Over the past week, thermal coal quotations on the European market saw high volatility in prices, which ranged between 117 USD/t and 26 USD/t amid a sharp rise in gas indices to a 3-month high, driven by the escalation of the conflict in the Middle East, along with a shrinking share of renewable generation. Moreover, the profitability of coal and gas generation remained negative, given the rising cost of CO2 permits. The share of renewables in Germany’s energy mix totaled 71% last week, down 7% from the previous week, while the share of fossil fuels expanded from 22% to 29%.
Gas quotations at the TTF jumped to 350 USD/1,000 m3 (+47 USD/1,000 m3 w-o-w) on reduced Norwegian gas supplies and Israel’s response to Iran’s weekend strike.
South African High-CV 6,000 climbed above 110 USD/t, continuing to follow strong prices in Europe. There was also an increase in demand from Indian consumers, including sponge iron producers. Also, the Indian government extended its directive on 15 power plants (18.37 GW), running on imported coal, until October 15, requiring full capacity utilization to avoid power shortages. This initiative by the authorities is expected to contribute further to higher import volumes.
Coal export shipments via Richards Bay Coal Terminal (RBCT) through Q1 2024 rose to 13 mio t (+1.9 mio t or +17% vs. 1Q 2023), caused by improved transportation of the material. Thus, exports in 2024 via RBCT could exceed 50 mio t vs. last year’s 47 mio t. Meanwhile, the average figure in 2013-2020 was 70 mio t. Terminal stocks are estimated at 2.95 mio t (virtually unchanged w-o-w).
In China, spot prices for 5,500 NAR coal at the port of Qinhuangdao strengthened by 1 USD/t to 116 USD/t, reflecting lower production and growing consumption. There was also a decline in port inventories linked to a 0.2 mio t/day reduction in deliveries on the Daqin rail line as maintenance is underway, with traffic expected to normalize once the works are completed at the end of April. The decrease in output was attributed to stricter safety inspections at the mines. According to the published statistics, coal production in March was down 4%, while in Q1 2024 the exctraction amounted to 1.11 billion t (-4% vs. Q1 2023).
Furthermore, Shanxi Province raised the tax on standard coal from 8% to 10% and on processed coal from 6.5% to 9% to boost tax revenues. This initiative may lead to higher coal costs.
Inventories at 6 major coastal thermal power plants added 0.2 mio t to 13.5 mio t, while consumption climbed from 728 kt/day to 730 kt/day. Stocks at the 9 largest ports were down to 22.4 mio t (-0.6 mio t w-o-w).
Indonesian 5,900 GAR weakened 1 USD/t to 90 USD/t as Indonesian coal companies cut prices to curb stockpiles, especially given the widened spread between supply and demand levels.
Australian High-CV 6,000 edged higher above 127 USD/t on strengthening quotations in Europe. An Indian sponge iron producer purchased Australian Medium-CV 5,500 at 91-91.5 USD/t FOB, that became more attractive from the price viewpoint, although Indonesian consumers usually prefer South African material due to higher content of bound carbon. Quotes were also supported by the statement of the Australian weather service on possible completion of El Nino phenomenon, which may lead to a reduction in output.
Meanwhile, the Japanese weather service issued a long-term forecast, indicating summer temperatures in Japan to be above normal. As a result of heavy rains from April 05 to April 12, the railway traffic on a 100-kilometer line to the Port Kembla Coal Terminal was interrupted, causing delays in loading coal from the Illawarra region.
Australian HCC metallurgical coal quotations surged above 250 USD/t on the back of strong demand from China, where prices also rose on higher steel mill utilization and the need to replenish stocks. The market conditions in the steel market are also improving. Some market participants are revising their price expectations upwards as trading volumes in the paper market grow.
The BHP and Mitsubishi Alliance (BMA) joint venture lowered its production forecast for FY 2024 (ending June 30) by 10% to 43-45 mio t from 46-50 mio t. Queensland production is dropping because of 2 tropical cyclones and rising costs.
Source: CAA
