Last week spot prices on the European coal market corrected below $380/t.
Experts spoke of a possible “overbought” market, as well as a decrease in demand for coal due to difficulties with transportation from the ARA ports due to the continued low water level in the Rhine. Coal stocks at ARA terminals remain close to historical highs at 7.56 mio t.
During the week, market participants expressed their concern that after the completion of the technical repairs of NS-1, gas supplies would not be resumed for political reasons. In addition, on July 18, 2022, Gazprom declared force majeure on gas supplies to several European consumers.
However, on July 21, 2022, the supply resumed in volumes equal to those before the start of the maintenance – about 67 mio m3 per day. This represents 40% of the gas pipeline capacity.
The European Commission recommended that EU member states reduce gas consumption in the period from August 01, 2022 to March 31, 2023 by 15% and replace it in the power mix with coal, fuel oil and other energy sources. The initiative was rejected by Spain, which hosts 7 out of 22 EU LNG terminals.
Meanwhile, it is estimated that Germany can reduce dependence on Russian gas supplies by increasing the load factor of coal-fired power plants already in use from 35% to 55%, which in turn will require an increase in material imports by 11 mio t per year.
Deliveries of Indonesian material to Europe since the beginning of the year reached 1.5 mio t. For comparison, for the whole of 2021, 0.66 mio t were delivered.
High CV South African material plunged below $310/t.
South African rail operator Transnet will complete 10 days of technical work on the rail line connecting the coal mines to the Richards Bay terminal on July 21, 2022. Coal stocks in the port dropped 19.5% w-o-w to 2.8 mio t.
The new government of Colombia, run by Gustavo Petro, who will take office August 7, 2022, is in no hurry to continue the process of selling the Calenturinas and La Jagua mines under Prodeco, formerly owned by Glencore.
The outgoing government of Ivan Duque has already postponed the deadline several times based on requests from potential buyers, who, apparently, were not satisfied with the terms of the sale.
In particular, Glencore still owns the railway line and port infrastructure necessary for the export of the material.
In 2019, Prodeco exported 15.6 mio t of coal, and in the best years, export volumes reached 20 mio t. In early 2020, all operations were suspended and in September 2021, the process of transferring mining licenses to the state began.
Potentially, according to experts, the launch of production and export of Prodeco could help Europe overcome the energy crisis.
In China, spot prices for NAR 5500 coal edged down to $183.4/t.
In the domestic market of China, a decrease in prices is seen in ports and at cuts against the backdrop of a decrease in production by the chemical sector. Ammonia and fertilizer producers, consuming medium- and high CV materials, have been losing money in the past few weeks.
Power plants using low CV coal are supplied under existing contracts and do not rely heavily on the spot market.
An increasing number of market participants are expressing concern about negative forecasts for industrial production in the coming weeks. Thus, cement production for H1 22 fell by 15% to 977 mio t, which is the poorest performance in 11 years.
The decline in cement prices since mid-March amounted to about 20%. Fertilizer producers witness lower capacity utilization. The decline in coal prices comes despite hot weather and increased demand for air conditioning in many parts of the country.
Quotations of the Australian material fell to 405 dollars per ton. An improved interest of European buyers in this material is reported.
In addition, Australian producers with processing facilities are trying to process medium CV high-ash material into a premium product and sell it to the high-margin markets of Japan, Korea and Taiwan.
The Australian rail operator The Australian Rail Track Corporation (ARTC) has fully restored rail transportation to the port of Newcastle, halted due to flooding caused by heavy rains.
According to estimates, about 4.3 mio t of coal couldn’t be delivered to the port during the idle period from July 5 to 14. Meanwhile, meteorological agencies expect a new wave of heavy rainfall in the region.
The Indonesian Coal Index 5900 kcal/kg GAR traded at $184.00/t FOB Kalimantan. Chinese consumers remain interested in low CV coal from Indonesia and use it to blend with high CV coal produced domestically or imported from Russia.
Metallurgical coal prices continued to decline to $230/ton amid downtrend in the steel market and reduced demand from steel mills.
Source: CAA
