Over the past week, European thermal coal quotations continued to rally above 265 USD/t. The indexes were supported by an increase in electricity demand on the back of a cold snap in Europe, as well as a sharp rise in gas prices. At the TTF hub, gas indices rose to 1,550 USD/1,000 m3 (+180 USD/1,000 m3 or +13% w-o-w), following a ramp-up in fuel consumption from storages. In addition, temperatures are forecasted to drop by 14 C° below normal on December 05-11, 2022.
Lower wind generation in Germany and increased coal-fired power generation also contributed to the price hike. To ensure winter energy security, France restarted the 0.6 GW Emile Huchet coal-fired power plant, which is expected to remain in operation until March 2023 and will consume about 0.6 mio t of coal during that period. Last week, a legislation to increase the minimum mandatory coal inventories at power plants by 40% went into effect in Poland. This requirement is expected to affect all producers in Q1 2023, so they will have to scale up coal imports.
South African High-CV 6,000 prices strengthened significantly above 235 USD/t on forecasts of a sharp cold snap in Europe and higher coal quotes on the European market. After the traffic was restored on both rail lines leading to the Richards Bay terminal, South African rail operator Transnet, cancelled the force majeure, announced on November 10, 2022. However, rail freight traffic has not yet returned to normal levels, that is also caused by continued cable theft on the railroad.
In China, spot prices for 5,500 NAR at the port of Qinhuangdao dropped by 12 USD/t to 180 USD/t, resulting from an increased volume of shipments via the Daqin rail line, high coal inventories at terminals and a low utilization rate at large power plants. A sharp rise in COVID infections in the regions is also adversely impacting coal demand.
Indonesian 5,900 GAR corrected down by 3 USD/t to 164 USD/t, on deteriorating demand from Europe, China and India. Meanwhile, supply remains tight due to heavy rains. Indonesia’s PT Bumi Resources downgraded its 2022 production forecast from 78-83 mio t to 70-76 mio t. At the same time, this year Bumi’s share in the domestic market will rise from 38% to 42%.
The price of High-CV Australian 6,000 jumped above 390 USD/t on the back of limited supply because of the ongoing rains and colder weather in a number of consumption regions.
Australian metallurgical coal indices are holding in the range of 245-250 USD/t in the absence of new drivers in the steel market. It is expected that in the nearest future, some support to quotations may be provided by seasonal restocking by end consumers and limited supply from Russia, related to logistical issues.