Last week coal indices in the European market went on declining below 68 USD/t amid record-high EU carbon prices and increased wind output in some European countries. On April 06, 2021 prices of EU emission quotas exceeded 44 EUR/t.
This is the highest value since 2005. According to the US investment bank Goldman Sachs, the price of quotas may reach 150 EUR/t in the coming years. The increase in wind generation to 1825 GWh (+648 GWh to April 01, 2021) squeezes share of coal generation in the power mix and negatively affects coal indices.
Nevertheless, market participants expect coal prices to grow in the medium term after the International Monetary Fund published a positive forecast for the dynamics of the global economy and electricity demand in 2021.
South African coal quotes stabilized at the level of 94-95 USD/t amid a number of deals with cement producers from Pakistan. However, lowering demand of Indian buyers due to high prices for South African material may weigh on indices in the medium term.
Richards Bay coal stocks surged to 3.2 mio t (+0.1 mio t to March 31, 2021).
New procurement policy of the South African generating company Eskom forces some coal producers in South Africa to look for new markets. Earlier, the South African company Seriti Resources launched a new thermal coal mine New Largo seeking to extend the contract with Eskom on the existing terms. According to representatives of Seriti Resources, Eskom unilaterally terminates contracts and offers to buy coal at lower prices. At the moment, Seriti Resources plans to increase export volumes.
Low activity of traders and coal producers in Australia amid Easter holidays weakened thermal coal indices below 94 USD/t. However, according to market participants, the gradual recovery of coal mines after the floods and the revival of the market after the holidays will contribute to the growth of quotes.
On April 06, 2021 the Minister of Energy and Natural Resources of Australia Keith Pit opposed the introduction of a ban on the financing of coal projects by private pension funds. The Australian Conservation Foundation (ACF), an organization that lobbies for the implementation of “green” initiatives in the Australian government, calls for amendments to the law and limiting the financing of new coal mines construction by pension funds in order to redirect finances to the creation of renewable capacities.
On April 07, 2021 during the meeting of the National Development and Reform Commission of China, the chairman of the Commission called on market participants to assist in the formation of a new stricter approach to control over imported coal.
Heavy rains in southern Indonesia limit the production of export low-calorific coal, increasing the quotes to 76 USD/t. Stronger demand from Chinese companies seeking to buy material before the religious holidays (Ramadan) in Indonesia also supports the indices.
The decline in trading activity amid the holidays in Australia weakened the indices of Australian metallurgical coal to 110 USD/t.
Source: CAA Analytics
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