Over the past week, European thermal coal indices firmed to the range of 122-124 USD/t. Quotes were supported by the growth of energy markets amid escalation in the Middle East and Ukraine’s attack on gas measuring station near the border town of Sudzha (the Kursk region), that is part of a pipeline, still supplying Russian gas to Europe. Furthermore, Germany posted a sharp rise in coal-fired generation, higher electricity prices and a drop in wind generation to a one-year low.
Gas quotes at the TTF hub jumped another 10% to 436.27 USD/1,000 m3 (+37.69 USD/1,000 m3 w-o-w), reaching a record high since December 2023 on the back of conflicts as well as gas infrastructure maintenance. Coal stocks at ARA terminals increased to 5.33 mio t (+0.24 mio t or +5% w-o-w).
South African High-CV 6,000 kept steady at 115-116 USD/t, supported by ongoing growth in the European market and strong demand from India. Transnet was also undergoing a 10-day maintenance, which was completed a day late due to cable theft. Inventories at Richards Bay Coal Terminal (RBCT) declined to 3.3 mio t from 3.6 mio t.
Transnet lowered its rail coal shipment forecast by 10% to 54 mio t for the fiscal year ending March 31 because of cable theft and railcar derailments. Meanwhile, exports through the RBCT terminal are expected to hit 33.6 mio t in Jan-Aug 2024 (+3% vs. Jan-Aug 2023).
In China, spot prices for 5,500 NAR coal at the port of Qinhuangdao marginally adjusted downward to 119.5 USD/t on expectations of deteriorating demand. Many coal suppliers are forecasting a market slowdown in mid-August, when consumption in most regions may shrink, following further easing of the heatwave. Generating companies expect an even bigger correction in the coming weeks, given the drop in demand on the spot market.
Some market participants are taking a wait-and-see approach, hoping for a recovery in quotations, taking into account that the pace of spot shipments to ports slowed down as FOB prices were 7-17 USD/t below FCA prices and logistics costs.
Inventories at the 6 largest coastal thermal power plants decreased to 13.83 mio t (-0.14 mio w-o-w), while coal stocks at the 9 largest ports totaled 25.23 mio t (+0.21 mio t w-o-w).
Indonesian 5,900 GAR remained virtually unchanged at 90.7 USD/t. Negative sentiment is partially offset by limited supply, caused by unfavorable weather conditions. However, some market actors believe the supply situation is likely to improve soon, especially in East Kalimantan. Some Indonesian producers expect China to ramp up imports in late September to replenish stocks ahead of winter.
Australian High-CV 6,000 climbed above 146 USD/t on sustained demand from the Asia Pacific and reduced supply of Colombian material, following continued heavy rains in the country. Moreover, falling Russian coal exports, caused by infrastructure constraints and high production costs, are supporting the price hike.
Australian HCC metallurgical coal index plunged below 215 USD/t, reflecting increased supply, ample inventories and low demand. Chinese producers accelerated the pace of steel and pig iron production cuts due to unfavorable market conditions (daily output decreased by 7-8% vs. July 20, 2024), while at least 10 plants scheduled blast furnace maintenance in August. Given the continuing negative fundamental factors, market participants expect further downward pressure on metallurgical coal quotations.
Glencore abandoned plans to spin off its coal business after acquiring a 77% stake in Canadian metallurgical coal producer Elk Valley Resources. The decision was backed by 95% of Glencore shareholders, who opposed the idea to exit the profitable, but polluting business, to retain the cash-generating asset for the funding of its expanding metals production, including copper.
Source: CCA Analytics
