Active short covering by traders on the paper market at the beginning of the current week boosted European thermal coal quotations. On Tuesday, spot prices exceeded 109 USD/t, while trading volume on the ICE exchange reached 2.5 mio t (compared to an average of 1.8 mio t). Then activity faded with the indices correcting downward to 107 USD/t.
South African High-CV 6,000 rose above 108 USD/t. In South Africa, another train derailment disrupted two major coal export rail lines. On Wednesday, July 17, a train derailed near Exxaro’s Grootegeluk mine in South Africa’s Limpopo province. This affected a railroad section of Transnet’s Northern Corridor, which connects South Africa’s major coal mines to the Richards Bay Coal Terminal (RBCT).
This is the second derailment in less than 10 days: the first occurred last week, resulting in the closure of the Northern Corridor for three days. The lines reopened on Saturday, but cable theft and power outages started again a few days later.
Delays in coal deliveries forced Transnet to postpone scheduled maintenance for two weeks (July 23-August 01) to give producers more time to build up RBCT coal stocks. At the end of last week, RBCT inventories were raised to 3.24 mio t, however, by Tuesday they had fallen to 3.14 mio t amid rail disruptions.
In China, spot prices for 5,500 NAR coal at the port of Qinhuangdao stayed flat at 120 USD/t. Despite hot weather, with temperatures reaching 40˚C, the demand in the Chinese domestic market remains low. Persisting significant coal inventories along the entire supply chain (at producers, ports and thermal power plants) continue to negatively impact spot purchases.
According to market participants, current fundamentals are weaker than in the same period last year, when the period of low demand on the spot market lasted from the end of July to the end of August. The situation is expected to follow a similar scenario in the next few weeks.
Stocks at the 9 largest ports amounted to 26 mio t (-1.4 mio t w-o-w).
Indonesian 5,900 GAR fell to 90.6 USD/t (-0.9 USD/t w-o-w), while 4,200 GAR was flat at 52 USD/t. The demand for Indonesian material from China and India is still limited. Current inventory levels enable Chinese traders to be selective in tenders. The same situation is observed with Indian counterparties on the back of stable growth of coal production in the country.
Australian High-CV 6,000 remains stable in the range of 133-136 USD/t. Despite high seasonal temperatures, Asian consumers are in no hurry to enter the spot market, while using existing coal stocks. Also, relatively low LNG prices and sufficient supply of the material continue to hinder price growth.
Australian metallurgical coal index HCC went sharply below 235 USD/t after a deal was struck on Monday to deliver a batch of 40,000 t of premium HCC at 235 USD/t, FOB Australia. The drop from levels of 250 USD/t was seen by market participants as a fair correction after the price hike, caused by the shutdown of Anglo American’s Grosvenor mine.
The demand for Australian material in the Asia-Pacific region remains muted given the strong inventories held by consumers. Moreover, some end buyers are trying to oversell on the spot market the shipments delivered under long-term contracts. Market participants also mention the wide bid-ask price spread (over 20 USD/t), which may be a harbinger of further correction in the premium metallurgical coal market.
Limited supply of the material continues to support Australian PCI quotations at the level of 200 USD/t. Market participants note that the traders’ price offers reach 205-210 USD/t. Meanwhile, some market participants take a wait-and-see attitude, pointing to unreasonably high prices for Australian PCI compared to Russian material.
The deal for delivery of Russian LV PCI to China with shipment on July 20-30 was concluded at the price of 151.6 USD/t CFR China. A large batch of LV PCI was offered to Indonesian customers at the price of about 170 USD/t CFR Indo. The price of MV PCI with delivery to India was at 170 USD/t CFR.
Source: CCA Analytics
