Over the past week, thermal coal indices on the European market plunged below 320 USD/t amid falling electricity and gas prices, a forecasted increase in renewable energy generation as well as reduced concerns about supply shortages in the coal market as stocks at ARA terminals rose to 2-year highs. Coal inventories at ARA terminals reached 7.2 mio t (+0.4 mio t to June 01, 2022).
The German government passed a bill allowing additional coal- and fuel oil-fired power plants to be activated in the event of a gas deficit, further enhancing the security of the country’s energy supply. A reserve of such power plants in Germany will be in place by March 31, 2023.
South African prices fell below 310 USD/t, following the European market indices, amid India’s diversification of purchases, including increased imports from Indonesia and growing supplies of Russian coal, being offered at a discount.
In China, spot prices for 5500 NAR strengthened to 189 USD/t FOB Qinhuangdao. The increase in steam coal prices on the Chinese domestic market resulted from the recovery in industrial activity due to the phasing out of lockdowns. Market participants are also concerned that Chinese increased coal inventories are mainly represented by low-CV coal, so the growth in demand will lead to their rapid depletion.
According to the National Energy Administration, China plans to commission 57 GW of new coal-fired generation capacity in 2022 (+23% y-o-y). As part of its energy security initiative, China’s investment in TPPs totaled 2.69 billion USD in January-April, up 55% year-on-year, compared with an 18% increase in 2021 and a 27% decline in 2020.
A downturn in trading activity among Asian consumers, who are taking a wait-and-see attitude due to high price levels, negatively impacted Australian prices, which adjusted below 400 USD/t. Indian consumers are paying more and more attention to Russian material, which is offered at a discount to Australian material. Major market participants are buying large volumes of high-CV coal, splitting the lots into smaller batches and reselling them to minor traders.
Following Europe, Australian authorities intend to reopen 30% of previously closed coal-fired power plants to address the energy crisis, recognizing that their decommissioning and abandonment of investment was premature. This initiative will lead to a corresponding decrease in the share of coal exports. Meanwhile, thermal coal exports in April 2022 fell to 15.1 mio t (-8% y-o-y).
Indonesian 5900 GAR traded at 195 USD/t. The Indonesian material was under pressure on lower demand from China, which has seen an increase in hydro generation, rising domestic production and high coal stocks. At the same time, high-CV coal is supported by demand from Japan, South Korea and Taiwan.
The Australian metallurgical coal index fell below 380 USD/t. The market is not seeing any demand from end-users at prices above USD 400/t FOB Australia as steel prices continue to decline, causing steelmakers in the Asia-Pacific market to take a wait-and-see approach.