Last week the European coal market last week continued to strengthen above 240 USD/t. The indexes were supported by an increase in demand for electricity due to a cold snap in Europe, rising gas prices, as well as the impossibility of sending ships from Puerto Bolivar amid the ongoing blockade of railroad tracks to the terminal by former Cerrejon employees.
South African High-CV 6,000 coal indices rose above 220 USD/t last week. On November 19, 2022, the South African railway operator Transnet restored traffic on both lines leading to the Richards Bay terminal. During the incident, coal inventories at the terminal dropped to 1.95 mio t, the lowest level since the end of January 2022.
On November 23, 2022, Colombian Cerrejon resumed shipments from the port of Puerto Bolivar after a 15-day blockade of railway tracks to the terminal by former employees of the company. The protesters were forced to flee by the police. During the period from November 1 to 22, the port shipped 458k t of coal compared to 1.5 mio t y-o-y. Due to the critically low level of coal stocks at the terminal, a number of ships were redirected to other ports of Colombia (Puerto Drummond and Puerto Nuevo).
In general, for 10 months of 2022, the export supplies of coal from Colombia amounted to 34.5 mio t compared to 42.7 mio t y-o-y. Continuous heavy rains, as well as periodic blockages of infrastructure by the local citizens had a negative impact on the volume.
In China, spot coal prices for 5500 kcal/kg NAR coal at Qinhuangdao Port declined further to 192 USD/t, down 16 USD/t. The sharp increase in the number of COVID infections in the regions has a negative impact on demand. In general, traders expect further deterioration in macroeconomic indicators in November after industrial growth slowed to 5% in October compared to 6.3% in September. Due to weak demand, Shenhua was forced to reduce procurement prices from third-party suppliers twice during the past week, which in turn caused panic among manufacturers. Energy companies operating in the coastal regions of the country canceled a number of tenders for imported material and switched to cheaper domestic coal. Prices has been under pressure due to actions of government that continues to monitor quotes. Market participants expect prices to drop to the government cap of 161.99 USD/t FOB for coal 5500 kcal/kg NAR over the next couple of weeks. The decline in demand for coal is coupled with the growth in supply volumes on the Daqin railway line and the growth of coal inventories in ports.
Indonesian 5,900 GAR price dropped to 167.00 USD/t amid a relatively low demand from major consumers such as China and India. Low-CV coal prices are supported by demand from the Philippines, Thailand and Bangladesh, as well as continuous heavy rains.
Prices of High-CV Australian 6,000 coal jumped to above $355/t. High-CV prices were supported by limited supply due to rains as well as higher trading activity for supplies in early 2023.
Australian metallurgical coal indices fell below 250 UD/t.
On November 19, 2022, the Government of India cancelled export duties on iron ore, pig iron and a number of metallurgical products, and also returned a 2.5% import duty on metallurgical coal, PCI and anthracite and a 5% duty on met coke. Six months earlier, the government, guided by the goals of curbing inflation in the country, reducing the cost of metal production and increasing its supply to the domestic market, increased duties on the export of iron ore and concentrates, and also canceled duties on the import of metallurgical coal. According to experts, the return to the previous conditions was made under pressure from metallurgical companies, which suffered losses due to insufficient demand in the domestic market.
A few days after India returned its import duties, the Australian government ratified a free trade agreement with India. The initial version of the agreement was signed on April 2, 2022. It provides for the abolition of duties on 85% of goods from Australia (including coal) exported to India, as well as duty-free trade in the Australian market for 96% of goods imported into the country from India.
Therefore, Australian suppliers will be protected from the import duty on metallurgical coal. The duty on Australian thermal coal will be phased out over the next 5 years.
Now the agreement must be ratified by the Indian Parliament. It is expected to come into force on January 1, 2023.