(CAA Analytics) European coal indices dipped below 50 USD/t due to lowering gas prices and increasing share of renewables in the European power mix.
Over the past week the price of natural gas on the TTF trading platform reached 6.288 EURO/MWh (-0.478 EURO/MWh to Aug 05, 2020). According to the Ember analytical agency, the share of renewables in the EU electricity production in H1 2020 amounted to 40%, outperforming coal and natural gas with their 34% share.
The remaining 26% of the generation volume was provided by nuclear power plants. The abundant ARA reserves of 6.78 mio t (unchanged to Aug 05, 2020) put additional pressure on coal quotes.
According to Glencore, which published its H1 2020 results, more than 50% of the global seaborne thermal coal supply are unprofitable at current spot prices, as the sharp drop in demand, caused by the pandemic, drove indices to the lows, last time observed in 2016. In order to return market to the balance, a further reduction in supply is required through 2020.
On August 07, 2020 after the failure of the first round of negotiations between the Association of coal workers of Colombia Sintracarbon and the local coal miner Cerrehon on increased benefits for coal workers, Sintracarbon announced a vote on whether to organize a strike at the plants of the coal company or seek arbitration. In 2019, Cerrehon extracted 25.7 mio t of coal.
Strong demand of Indian cement companies boosted South African material prices. However, the plans of the Indian state-owned mining company CIL in August to sell 15-20 mio t of high-calorific coal to local consumers may weaken imported coal indices. Amid falling coal quotes on the international markets, a number of South African producers continue to divert export quality material to the domestic market, creating an oversupply and lowering prices.
Availability of cheap thermal coal on the inland market of China, as well as a lack of clarity on the part of Chinese consumers over the allocation of additional import quotas for Australian coal weakened the quotes of Australian material.
Waning consumer demand for Indonesian low-calorific coal from India is putting pressure on prices. According to market participants, Indonesian miners are forced to reduce operating costs at enterprises and slash investment programs to cover main expenses at least.
The exhaustion of customs quotas for the import of metallurgical material from Australia in a number of Chinese ports, as well as weak bidding activity in China in anticipation of benchmarks of local metallurgical enterprises to be announced soon, negatively affected the price of coking coal from Australia.
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