At the beginning of the past week, the European market saw an increase in coal and gas quotations on the back of continued uncertainty around the situation with labor strikes at gas platforms in Australia.
Potential shutdown of three LNG plants (Gorgon LNG, Wheatstone LNG and Woodside North West Shelf) may jeopardize 10% of world exports and provoke a sharp increase in global prices. On August 22, the cost of September natural gas futures at the TTF hub in the Netherlands rose above 500 USD/1,000 m3, while spot quotes for thermal coal in Europe reached almost 128 USD/t.
Following the news that Woodside Energy Group an in-principle agreement with labor unions, fuel quotations on the exchanges corrected, with thermal coal indices pulling back to the level of 120-122 USD/t. Nevertheless, negotiations at Chevron’s two Australian plants are still ongoing.
As of August 21, gas reserves in European storage facilities exceeded 91%. The 90% target was set for November 01, but was virtually met more than 2 months ahead of schedule. This is the highest level for this time of year since 2016.
Spain’s Ministry for the Ecological Transition approved the closure of Endesa’s 1.5GW As Pontes coal-fired power plant. 130 kt of coal remaining in stockpiles will be used up within a month and a half. The thermal power plant will be shut down in November.
South African High-CV 6,000 followed the movement of European indices, having strengthened during the week to almost 125 UST/t. After a correction, prices reverted to the level below 120 USD/t. Indian sponge iron producers remain interested in buying South African material.
Equipment damage at one of the berths at Transnet’s South African Richards Bay Dry Bulk Terminal (DBT) resulted in a delay of coal shipments. The exact recovery time remains unknown. The berth is used for loading Panamax vessels. In January-July 2023, 3.9 mio t of South Africa material was shipped from the berth for export.
In China, spot prices for 5,500 NAR at the port of Qinhuangdao slightly decreased to just below 114 USD/t.
The downward trend on the Chinese domestic market slowed down. The reason was a series of fatal accidents at coal mines in Shanxi and Shaaxi provinces, after which the authorities demanded to suspend a number of production facilities and conduct safety inspections.
Market participants’ opinions on further price dynamics are divided. Some experts believe that after the incidents with fatalities the closure of some mines may follow, that could reduce the volume of supply and ultimately support the quotations. Others are of the opinion that a small reduction, if it happens, will not outweigh the current oversupply, and the downward trend could continue. The second view is also supported by the continued growth in hydro generation, heavy rainfall forecasts from the National Climate Center as well as reduced demand for air conditioning.
Australian High-CV 6,000 was backed by rising gas quotations. During the week, several October deals were settled at 160-162 USD/t. However, by the end of the week prices had corrected to the range of 157-159 USD/t.
FOB quotations of Australian metallurgical coal HCC retain support at around 260 USD/t amid stable demand from Japan, South Korea and India.