Over the past week, the growth of EU coal quotes continued to gain momentum, exceeding 57 USD/t. Strengthening of prices stemmed from stronger TTF gas indices, decrease in Colombian material supplies and lower average daily temperatures, boosting coal-fired generation in a number of European countries.
Spot prices for natural gas in Europe reached a maximum of 12.257 euros/MWh (+0.888 euros/MWh or +7.8% to Sep 23, 2020) since the beginning of 2020 amid concerns about possible restrictions of the Nord stream-2 construction by Germany, as well as a reduction in LNG supplies from the United States to the European market. Low volumes of coal exports from Colombia due to the ongoing strike of Cerrejon workers support the coal quotes in the paper and physical markets. However, the abundant ARA reserves of 6.71 mio t (-0.13 mio t or -2% Sep 23, 2020) limit further growth of quotes.
According to analysts’ projections, the ongoing strike, organized by the Association of coal industry unions Sintracarbon, may reduce exports of Cerrejon to 17 mio t in 2020 (-9.3 mio t or -35.3% y-o-y). In H1 2020, Cerrejon exported 9.4 mio t of coal (-3.9 mio t or -29% y-o-y).
Stable demand of Indian buyers, a number of deals for the supply of South African coal to Pakistan, as well as higher discounts of South African producers compared to Australian exporters, contributed to the growth of the FOB Richards Bay indices.
Lowering bidding activity of the Chinese customers ahead of the Golden Week holiday on October 01-08 had a negative impact on the indices. The uncertainty in the Chinese market over the Chinese government’s policy regarding the allocation of additional import quotas increases the risks for buyers and puts some pressure on quotes. However, market participants expect that by January 2021, when seasonal demand for imported thermal coal reaches its peak, the Chinese government will be forced to ease import restrictions.
Seasonal rains, limiting the supply of material to local ports, supported Indonesian coal prices despite weakening demand of Chinese energy companies.
Rising demand for steel amid the increased industrial activity in China and a reduction in the supply of coking coal due to inspections in Shanxi province by the National commission for safety at coal mines supported the indices of metallurgical coal from Australia. The expiration of licenses for a number of coking coal mines in Inner Mongolia (China) provided additional stimulus for price upside.
Source: CAA Analytics
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