Over the past week, European thermal coal indices adjusted below 123 USD/t after reaching a 12-month high. The pressure was exerted by a decrease in German electricity quotes from 134.00 EUR/MWh to 116.65 EUR/MWh, as well as a slowdown in gas prices. Furthermore, coal shipments to the EU from Colombia and South Africa are expected to increase. Coal-fired generation margins (clean dark spreads) declined, nevertheless remained positive.
Gas quotations at TTF hub strengthened to 506.63 USD/1,000 m3 (+1.21 USD/1,000 m3 w-o-w). Market participants are concerned about the escalation of the conflict between Russia and Ukraine, as well as possible sanctions against Russian LNG. Coal stocks at ARA terminals declined to 3.95 mio t (-0.10 mio t or -2.5% w-o-w).
South African High-CV 6,000 slipped to 110 USD/t amid a correction in the European market and tensions with shipments through Mozambique, where protests have re-emerged threatening coal traffic flow to the port of Maputo. Meanwhile, Mid-CV 5,500 rose slightly on Indian sponge iron producers demand, which is forecasted to be strong through the end of the year. Indian sponge iron producers are expected to ramp up production by 10% by March 2025.
South Africa’s Exxaro Resources aims to boost coal production from the current 40 mio t to 50 mio t per year within a few years. At the end of 2024, the company’s coal exports are scheduled to reach 6.7 mio t.
Last week, hearings on Eskom’s high coal procurement costs began. The proceedings also stem from the generating company’s intention to hike electricity tariffs for consumers by 36%, 11.8% and 9.1% over the next 3 years.
In China, spot prices for 5,500 NAR coal at the port of Qinhuangdao kept sliding to 115 USD/t on high inventories as well as lower offers by coal mining companies. Meanwhile, in the coming days a sharp cooling of 4-6℃ is expected, which should support prices by increasing coal consumption at thermal power plants.
However, some market participants do not anticipate a significant rebound. Moreover, Shenhua’s pricing policy resulted in price cuts as high as 5.5 USD/t in some regions.
Inventories at the 6 largest coastal thermal power plants remained at 14.46 mio t (flat w-o-w), while coal stockpiles at the 9 largest ports totaled 28.92 mio t (+0.18 mio t w-o-w).
In Indonesia coal indices showed mixed dynamics without a strong trend. Indonesian 5,900 GAR firmed up to 94 USD/t, while 4,200 GAR weakened to 52 USD/t on the back of limited demand from the Asia Pacific.
Australian High-CV 6,000 fell below 139 USD/t on high inventories in China, Japan and India. Besides, the weakening yuan and Chinese below-target GDP growth are also weighing on imports. Anti-coal protesters attempted to block the port of Newcastle, affecting coal shipments to some extent. The protesters demanded the termination of new mining projects and a suspension of coal transshipment at the port by 2030.
Australian HCC metallurgical coal index continued to decline, plunging to 203 USD/t as fundamentals remain unfavorable. Also, China’s Dalian Commodity Exchange saw further prices decline, given the negative sentiment in China on the expectation of new import duties from the US, resulting from Trump’s victory, which could hit steel exports.
The China Coal Transportation and Distribution Association (CCTD) said in its 2025 forecast that demand for coking coal in China will be insufficient in response to shrinking steel consumption and a 5% increase in scrap use by steel mills.
Steel producers in Europe are also facing falling demand and high costs, with Thyssenkrupp Steel announcing a planned production cut from 11.5 mio t to 8.7-9.0 mio t per year and laying off 11,000 employees.
Source: CCA Analysis
