World coal market: brief overview

European thermal coal quotations jumped above 118 USD/t over the past week. The market experienced increased volatility, caused mainly by gas price fluctuations. The news about the extended maintenance of Shell-operated Nyhamna plant in Norway (which will reduce gas exports from the country by nearly 80 mio m3 over the next month), forecasts of above-average temperatures in Europe (which will increase demand for air conditioning), and low water levels in the Rhine (which limits coal transportation by barges from ARA terminals to power plants) provided uptrend support.

The clean dark spread for German thermal power plants turned positive for the first time since April (+1.14 EUR/MW). Gas remains more profitable, with a clean spark spread of about +9.5 EUR/MW.

Total ARA inventories remained around 7.3 mio t. Gas storage facilities in Europe are 73% full, up 20% y-o-y.

South African high-CV (6,000) coal price climbed above 101 USD/t. Market participants notice the demand for African mid-CV material from Indian sponge iron producers.

In China, spot prices for coal 5500 NAR at the port of Qinhuangdao fell by 4.19 USD/t to 106 USD/t. Negative sentiment in China’s domestic market persisted. Shenhua once again announced at the weekend that it was lowering coal procurement prices by an average of 28.0 USD/t for high-CV material used in the chemical industry and by 8.4 USD/t for mid-CV coal going to power plants.

Market participants expect FOB quotations at ports to continue falling until they reach the July contract price level of 99.16 USD/t for 5,500 kcal/kg coal, as most TPPs have completed purchases for June-July, while demand from the non-energy sector is subdued amid local production cuts as well as the deteriorating financial condition of companies.

Hot weather (35-40 ˚C) settling in a number of northern provinces of the country, as well as guidance from NDRC to increase contract supplies to TPPs in coastal and central regions provided little support to prices in the ports.

Indonesian 5,900 GAR price reached 93.25 USD/t FOB Kalimantan (-$4.75/t w-o-w). Indonesian prices remained under pressure. Some Indonesian miners are considering options to reduce production due to weak demand from China and India and lower prices approaching the break-even point (40-50 USD/t for various companies).

Price of high-CV Australian coal (6,000) fell below 127 USD/t, hitting its lowest level since June 2021.

Buyers are in no hurry to enter into contracts for spot deliveries, because weather forecast for most of the Northeast Asian countries suggests moderate temperatures this summer. Current needs are met by shipments under long-term contracts.

Australian metallurgical coal prices dropped to around $227/t amid lower demand.

Glencore made a cash offer to Canada’s Teck Resources to buy its metallurgical coal mining business (Elk Valley Resources – EVR). The amount of the bid was not disclosed, but Glencore’s plan is to spin off its coal business and EVR into a separate company, CoalCO, over the next 12 to 24 months. Earlier Glencore proposed to buy EVR with stocks (share in the new company), but the offer was rejected by the shareholders of Teck Resources, who considered that the risks to enter the coal business of Glencore (steam coal mining) were too high.

Source: CAA

World coal market: brief overview