Last week, thermal coal indices on the European market fell below 106 USD/t, with no demand for July deliveries.
Gas quotations at TTF hub (day-ahead contracts) at the end of the week showed downward dynamics and traded at 393 USD/1,000 m3 (-10 USD/1000 m3 w-o-w). Coal reserves at ARA terminals for the first time in two years dropped below 5 mio t and amounted to 4.96 mio t (-0.28 mio t w-o-w).
South African High-CV 6,000 also slipped below 106 USD/t amid the overall negative trend. South African rail operator Transnet postponed its annual maintenance operations from July 9-18 to the last week of the month due to the need to build up material stocks at Richards Bay terminal.
Coal stocks at the port dropped to 2.4 mio t (-100 kt y-o-y). Frequent train derailments, breakdowns, cable theft and broken railroad tracks limit the regularity of shipments to the port. Exxaro estimates that if current rates are maintained, RBCT will handle 46.7 mio t of coal at end of the year, which would be even lower than last year’s twenty-year low of 47.2 mio t.
Last week, the main shipments from Richards Bay were to India (about 680 kt) with small volumes also delivered to Pakistan and Mozambique.
In China, spot prices for 5,500 NAR coal at the port of Qinhuangdao decreased by 1.27 USD/t to 120.22-121.63 USD/t due to accumulation of high levels of stockpiles, low demand from the chemical and metallurgical industries, as well as continued heavy rains in the eastern and central provinces. Rising water levels led to an increase in hydro generation, which negatively impacted coal-fired generation.
Inventories at 6 largest coastal thermal power plants grew to 15.03 mio t (+0.38 mio t w-o-w), while stocks at 9 largest ports totaled 27.18 mio t. (+0.13 mio t w-o-w).
Indonesian 5,900 GAR was flat at 93 USD/t. A number of Indonesian producers have fulfilled their long-term contracts plan by 80% since the beginning of the year, which allows them to hold the price at the moment. The spot market is also somewhat supported by lower production and disrupted port logistics on continued rainfalls in some parts of South Kalimantan and Sumatra. At the same time, the Indonesian coal market is experiencing an increase in the bid/offer spread.
On the other hand, high coal inventories in China and India lead to limited demand from consumers. In some regions of India, the rainy season begins, which will put on hold many infrastructure projects and reduce demand from metallurgical and cement producers, and also result in the growth of hydro generation.
Australian High-CV 6,000 fluctuated around 131-132 USD/t during the week amid weak Asian demand. Above seasonal average temperatures in Japan and other parts of Asia, coupled with robust inventories at coal-fired power plants, kept buyers away from concluding prompt deals.
In addition, the coal market is being pressured by relatively low LNG prices. Prices with delivery to Japan and South Korea in Aug-Oct fell to 12.45-12.60 USD/MMBtu (-0.3 USD/MMBtu w-o-w) amid low demand. According to market players, Asian LNG buyers can easily replenish stocks on the spot market at low prices or pick up diverted cargoes from Europe, which is experiencing oversupply.
Australian HCC metallurgical coal quotations fell to 239 USD/t. PCI quotations edged down to 185 USD/t.
Demand from Japan for spot supplies of premium HCC metallurgical coal remains low, as consumers are supplied with long-term contracts shipments. In addition, steel demand in the country remains low due to the weakness of the automotive sector and difficulties in the export market, where it is increasingly difficult to compete with Chinese steel producers.
Meanwhile, Indian consumers are expecting prices to fall further, arguing that there is sufficient material available on the spot market on the one hand and a slowdown in the steel sector during the monsoon on the other. Demand from China is also subdued due to the accessibility of Mongolian material as an alternative.
In the PCI coal market, prices are supported by limited supply from Australia and Russia. In addition, some consumers are forced to resort to Australian coal due to difficulties in making payments for Russian material.
Source: CAA
