Last week, European thermal coal indices plunged below 210 USD/t. Negative sentiment in the Chinese market driven by the requirements of the National Development and Reform Commission of China (NDRC) to reduce domestic coal prices, shutdown of businesses in the EU due to the high cost of electricity, the growth of wind generation as well as the technical correction of the markets put pressure on prices.
November TTF gas quotes stood at the levels slightly above 90 Euro/MWh within a week and did not show a sharp decline. Gazprom’s refusal to book additional capacities of the Ukrainian GTS, as well as reserving only one third of the available capacity of the Yamal-Europe gas pipeline led to a short-term price spike to 1,300 USD/1,000 m3 (107.8 Euro/MWh). ARA coal stocks fell to a 7-month low of 3.9 mio t.
South African coal indices followed the trend of European quotations, sliding below 200 USD/t. Suppliers continue to experience difficulties with coal deliveries to the port of Richards Bay due to ongoing operational issues on Transnet’s railway line.
On October 16, 2021, NDRC called on domestic coal producers and traders to reduce coal prices below current spot levels until the end of the heating season (March 2022). For mid-CV 5500 NAR, the proposed price should not exceed 1800 RMB/t FOB Qinhuangdao (282 USD/t), while spot prices for the material were at 2500-2600 RMB/т FOB Qinhuangdao (390-406 USD/t). The commitment was not mandatory, but NDRC underlined that companies who would not follow the guidance may face reduced rail capacity. NDRC also stated that every possible means will be used to bring prices back to a reasonable range. According to market participants, the NDRC is ready to engage police forces (Public Security Bureau) to monitor the implementation of the decrees. The announcement triggered a sell-off in the commodities market. Thermal coal contracts traded on Zhengzhou Commodities Exchange went down 8%. Several coal producers (China Energy Group, Jinergy Group and Inner Mongolia Yitai Group) said they would cut their domestic prices to the required levels.
Australian indices shrinked below 235 USD/t following downturn in European and South African prices.
Strong demand from China and Southeast Asian countries amid tight supply boosted the quotes of Indonesian material 5900 kcal/kg GAR above 220 USD/t. According to weather forecasts, heavy rainfall in the region will continue until February 2022, negatively impacting on coal production volumes in the key mining regions of the country – Kalimantan and Sumatra.
Metallurgical coal prices moved sideways, staying below 400 USD/t. On the one hand, a limited supply of coking coal and PCI persists on the Chinese domestic market. On the other hand, the market reacted by selling forward contracts following NDRC announcements.
Source: CAA Analytics
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