World coal market: brief overview

Last week thermal coal prices in Europe climbed above 170 USD/t, being supported by a cold snap, which caused gas prices to rebound from their local lows by more than 10%. However, this strengthening is likely to be short-lived, given that such factors as above-seasonal temperatures and high coal and gas inventories, sitting at historic highs for this time of year, are still in force.

South African High-CV 6,000 quotations rose above 165 USD/t, following the upward correction of European indices and a lack of improvement in railway transportation of coal to South African export terminals. In addition, the prices were supported by increased interest from Indian sponge iron producers.

South African railway operator Transnet reported that the agreement with China Railway Rolling Stock Corp for the supply of spare parts and locomotives, reached in August 2022, has stalled as the Chinese company refuses to cooperate. In this regard, Transnet will have to look for an alternative supplier. However, the continuing shortage of locomotive traction directly affects the loading performance of the 3 rail lines: North Corridor, Northeast Corridor and Cape Corridor.

In China, spot prices for 5,500 NAR at the port of Qinhuangdao stayed almost unchanged, strengthening by 1 USD/t to 180 USD/t. In the Chinese market, the coal price growth slowed down ahead of the Chinese New Year celebration and owing to the increase in domestic production.

Based on the results of 2022, the overall annual coal production in China amounted to 4.49 billion t (+0.4 billion tons or +9% y-o-y). Thus, the actual figure exceeded the authorities’ plans by 33% (0.4 billion t vs. 0.3 billion t), bringing coal stocks of power companies to record levels.

Indonesian 5,900 GAR was flat at 144 USD/t, while the price of Low-CV material 4,200 GAR decreased to 84 USD/t (-1.4 USD/t w-o-w) as Chinese demand shrank in the run-up to the Chinese New Year celebrations. Other consumers also took a wait-and-see approach, expecting further decline in indices on the back of the downtrend and forecasted recession in the global economy.

High-CV Australian 6,000 slumped below 355 USD/t amid high stocks of steam coal in the Asia-Pacific and the onset of long holidays in China. The activity of Indian buyers also waned as they switched to consumption of coal held at local ports, where inventories surged up to 14.2 mio t (+1.1 mio t or +8% w-o-w).

On January 17, coal freight traffic resumed between Queensland and the Abbot Point, Dalrymple Bay and Hay Point terminals, albeit with some speed restrictions. On January 14, coal transportation was halted after heavy rains, which came together with the Tropical Cyclone Ellie, and had a negative impact on the shiploading operations.

The authorities of the Australian state of New South Wales are going to expand the list of companies, which will be required to reserve 10% of their coal production for the supply to the domestic market, that may support prices on the global market.

Australian metallurgical coal indices spiked above 320 USD/t due to lower shipments, resulting from the cyclone and the easing of restrictions on Australian coal supplies to China.

Source: CAA

World coal market: brief overview