World coal market: brief overview

Over the past week, spot coal prices in Europe fell below 335 USD/t, resulting from price correction on the gas, oil and electricity markets on the back of record levels of ARA stocks holding at historical highs of 8.1 mio t (-0.1 mio t w-o-w).

Following the statement of the US LNG terminal Freeport representatives on the complete resumption of exports at the beginning of October this year, gas prices in Europe rolled back to 2,100 USD/1,000 m3 (-200 USD/1,000 m3 or -10% w-o-w). In addition, the level of gas reserves in the EU underground storage facilities exceeded 70%, while Poland replenished its inventories to 100%.

Owing to the extreme heat in the EU, the water level in the Rhine River declined to a record low over many decades. In the coming days it may drop to 47 cm. If the river level sinks to 40 cm, the navigation will become impossible. Low water levels reduced the availability of barges to transport coal to end users, while those vessels that still can be used carry 75% less cargo than usual, causing the cost of coal transportation to skyrocket to historic highs, jumping as much as 1.5 times.

South African coal indices plunged below 305 USD/t, tracking European quotations amid weakened demand from Indian and Pakistani consumers.

South African rail operator Transnet plans to increase locomotive traction on the railway line leading to the RBCT coal terminal to provide the growth of shipments from 1.1 mio t to 1.4 mio t per week in a few days. Transnet also plans to carry at least 60 mio t of coal in FY 2022 versus 58.3 mio t in FY 2021.
In China, spot prices for 5500 NAR at the port of Qinhuangdao slipped to 170 USD/t (-4 USD/t w-o-w). On the Chinese domestic market prices continue to drop on low demand and sufficient supply. Market participants already do not expect the significant growth of quotations this summer given the near-term reduction in demand for air-conditioning. The cumulative deliveries to the ports of Bohai Bay (Qinhuangdao, Huanghua, Jingtang and Caofeidian) totaled 1.95 mio t in July, having surged by 18% to July 2021. Thus, coal stocks in the ports amounted to 24.4 mio t as of July 31, 2022 against 19.1 mio t a year earlier.

Indonesian 5900 GAR traded at 185 USD/t, FOB Kalimantan. India’s demand was limited due to logistical issues at the country’s ports, caused by large volumes of coal stocks, pushing the vessels waiting time to 10-15 days. On July 27, Indian authorities called on Indian Railways to allocate additional railcars for unloading storages at ports in the eastern part of the country.

Australian 6000 coal quotes corrected below 400 USD/t after reports that New South Wales authorities will not restrict exports in favor of domestic supplies as stocks at power plants have reached ample levels.
Australian metallurgical coal indices rebounded above 200 USD/t after a long fall, but still remain almost half the price of Australian thermal material, on the back of weak demand from steel producers. Prices were also supported by a notice that Illawarra Metallurgical Coal (IMC), a New South Wales metallurgical coal producer, owned by South32, is expected to go on strike as miners are seeking to renegotiate terms of wages. The company is also currently negotiating with trade unions over employees at the Appin and Dendrobium mines.

Source: CAA

World coal market: brief overview