Last week, the European coal market continued to rise above $400/t.
Gas prices in Europe during the week remained under the influence of mixed factors. First, amid the news about the decision of the Canadian government to return the turbine for Nord Stream-1, as well as the growth of gas supplies from Azerbaijan to southeast Europe, gas prices declined.
Then they recovered due to unplanned shutdowns of gas processing facilities and a lower supply from Norway. Prices have been also supported by the suspension of Russian gas supplies via NS-1 due to maintenance work on the gas pipeline from 11 to 21 July. European governments fear that when the maintenance is done gas supplies might not resume for political reasons.
On July 7, 2022, the German government passed the energy security bill allowing energy companies to extend the life of mothballed coal-fired power plants.
By the end of the year, 4.3 GW of reserved coal capacities can return to operations in addition to the extended life of a number of TPPs with a total capacity of 2.1 GW planned to be closed in 2022-2023.
The bill also envisages financial support foe energy companies that have suffered as a result of high energy prices (for example, Uniper). In addition, due to the ban on the import of Russian material, the law allows the purchase of coal with a high sulfur content.
The US suppliers can potentially benefit with their coal that was previously blended with Russian coal to reduce the sulfur content. However, the supply of this coal is limited due to strong demand within the US, as well as restrictions in logistics and labor. In addition, the possibility of using higher sulfur fuel in power plant boilers is limited due to technological reasons.
Coal stocks at ARA terminals are at persistently high levels 7.7 mio t. This is facilitated by both the tight schedule of the arrival of ships with coal, and the low water level in the Rhine, which reduces the ability to export coal by barges to power plants in Germany.
The South African Coal price hovers around $350/t.
South African rail operator Transnet has suspended rail service on the North Corridor for maintenance work from 12 to 21 July. This line connects the coalfields to the Richards Bay terminal.
As of July 11, 2022, the terminal’s coal reserves stood at 3.5 mio t, well below the typical level of 5 mio t on the eve of annual maintenance. For more than a year theft of cables on the railway lines and a lack of locomotives have been haunting Transnet’s operations.
According to forecasts, the volume of coal transportation by the end of 2022 will fall to 52 mio t (58 mio t by the end of 2021), which will be the poorest performance for the last 25 years.
At the same time, shipments of South African material through the Mozambican port of Maputo slowed due to road blockages amid protests over rising fuel prices.
In China, NAR 5,500 spot coal prices fell to $186/t. FOB Qinhuangdao. Mixed trends are observed within the domestic market of the country. The key coal-mining regions of Shanxi, Shaanxi and Inner Mongolia are at the mercy of heavy rains, which have stopped production at many mines and slowed down shipments of material to ports. In the east of the country, hot weather has set in a number of provinces, leading to a marked increase in household demand for air conditioning.
At the same time, in general, experts note the slow recovery of the Chinese economy after long lockdowns in H1 2022 and weak demand for coal from the industry. The upside potential for energy material prices appears to be limited.
Activity in the low CV Indonesian material market remains subdued due to weak demand from Chinese industrial facilities. The Indonesian Coal Index 5900 kcal/kg GAR traded at $186.00/t FOB Kalimantan.
High CV Australian coal rallied above $440/t. The material jumped last week as rail transportation between Newcastle’s export terminals and coal-mining regions in New South Wales was shut down due to flooding caused by heavy rains.
According to the operator The Australian Rail Track Corporation (ARTC), rail deliveries will be partially restored from the evening of 07/14/2022. According to experts, during the downtime, about 3 mio t of coal failed to be delivered to the port of Newcastle. Market participants see higher demand for Australian material from European buyers, and also expect the end of negotiations between Japanese consumers and Australian suppliers on a benchmark for high CV Australian material for FY 2022-2023.
Australian metallurgical coal prices fell below $250/t. Metallurgical indices remain under pressure from the continuing decline in demand for steel.
In China, the seasonal decline in demand was amplified by fears of a new wave of COVID.
In Europe, a growing number of steel companies are shutting down production due to high electricity prices and low demand. Last week
ArcelorMittal Dunkerque and the Serbian HBIS Group announced the shutdown of blast furnaces. According to unconfirmed reports, the German ThyssenKrupp may also stop a number of mills for maintenance