World coal market: brief overview

Thermal coal prices in the European market strengthened above 105 USD/t following the prices for all energy commodities amid the escalation of geopolitical tensions in the Middle East.

Support was also provided by drop of coal stocks at ARA terminals below 3.2 mio t, the lowest volume since March 2022. Information on quality of stored coal is unclear.

According to market participants, less than 1 mio t are materials with high sulphur or ash content. It is estimated that current stockpiles can meet consumption for three months at most. However, this is not a concern for market participants, due to the high share of renewables in power mix. In Germany, for example, the share of renewables in total electricity generation rose to 80% in the last week from 77% in the previous seven days. Fossil fuels accounted for 20% of power generation last week, with hard coal accounting for 2%, compared to less than 3% the previous week.

The European gas market rallied on news from the Middle East. Gas quotations at the TTF hub rose to 472 USD/1000 m3 (+52.35 USD/1000 m3 w-o-w). Currently, European storage facilities are almost 54.1% full.
South African coal 6000 exceeded 95 USD/t. Coal 5500 quotations consolidated around 67 USD/t.

South African operator Transnet has shortened by three days the annual scheduled maintenance of the rail line connecting coal fields in the provinces of Mpumalanga, Limpopo and KwaZulu Natal with the port of Richards Bay.

According to the new schedule, the line will be closed from July 15 to July 26. Transnet explained that the change was made to mitigate operational risks, particularly employee fatigue, and because of the “risk of not meeting the announced volumes”. Transnet has set a target of transporting 63 mio t of coal by the end of 2025.

Coal demand in India has been weakened by an early monsoon, which is curbing industrial activity and power demand in the country. Prices for sponge iron, whose producers are a major consumer of South African 5500 kcal/kg NAR coal, are trending lower. As a result, steel mills are forced to switch to cheaper local coal to maintain profitability. Cement producers are also switching to domestic product.

According to market participants, some traders are holding unsold batches of South African material in stockpiles, which they are seeking to sell, keeping pressure on prices.

The increase in coal consumption in the coastal regions of China and the expected spread of hot weather to the central regions of the country provide support to the domestic market. However, market participants remain cautious in forecasting whether this will lead to a significant increase in FOB prices. Demand for residential air-conditioning is expected to pick up and peak next month (currently, demand in some provinces remains constrained by rainy weather).

In China, spot prices for 5500 NAR coal at Qinhuangdao port remained relatively stable at levels of 85-87 USD/t.
The China National Coal Industry Association reiterated its forecast that domestic production could grow by 5% this year, exceeding the expected demand growth of 1.5-2.0%. The energy and chemical sectors are forecast to see a slight increase in demand, while the steel and construction industries are expected to see a decline.

Despite current weak demand trends, China’s thermal coal consumption for power generation will peak in 2025-2026, according to energy company representatives at the Coaltrans conference in Beijing. The forecast is in line with the national strategy outlined by China’s State Council in July 2024, which requires strict control of coal consumption growth until 2025, followed by a gradual reduction over the next five years.

Inventories at 9 largest ports amounted to 28.66 mio t (down 0.28 mio t w-o-w), still 1.96 mio t higher than the same time last year.

Indonesian coal index 5900 GAR decreased to 73 USD/t. Indonesian material remains under pressure amid weak demand from China and India. Offers for 3800 kcal/kg NAR coal are currently around 39-40 USD/t FOB.

Meanwhile, producers and traders are beginning to resist further price declines to minimize potential losses in a rapidly falling market. According to a number of participants, the market may reach the bottom in the near future.

High-CV Australian 6000 coal rose to 109 USD/t amid ongoing logistical problems due to flooding in the Hunter Valley. Tensions in the Middle East offered additional support for prices.

The average waiting time for material to be loaded onto a vessel at the Port of Newcastle has increased to three weeks. At the beginning of the week, almost 90 vessels were registered in the queue at Newcastle port. Some thermal coal buyers have started to consider Kembla port as an alternative shipping point. Kembla is located 275km south of Newcastle and is accessible by rail, but coal trains would have to bypass Sydney’s suburban network via an extended route. Kembla has less capacity and also requires regular maintenance work, the nearest of which is scheduled for June 16-21.

The Australian HCC metallurgical coal index fell below 180 USD/t in the continuing downtrend. In the Chinese domestic market, coking coal prices remain under pressure due to ample supply as a result of high inventories, as well as expectations of further decline in coke prices.

Indian consumers stay on the sidelines awaiting an update from the government on metallurgical coke import quotas, which are set to expire on June 30. Most believe that import quotas will be extended for the next six months as the anti-dumping investigation against metallurgical coke imports continues.

Source: CCA Analysis

World coal market: brief overview

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