Thermal coal indices in Europe are in uptrend, surging to around 125 USD/t. Growth of prices is driven by the shortage of coal supplies to the European market and heat waves in a number of EU countries. According to experts, the reduction of coal exports from Colombia, as well as a partial diversion of westbound coal shipments by some Russian exporters to the East, support coal quotes in Europe. Hot weather in the EU countries boosts seasonal demand for electricity, having a favorable effect on prices. Low wind output in the EU at 670 GWh (-432 GWh by May 2021) provides additional support to coal indices.
Limited supplies of South African coal after an accident on the railway line between the port of Richards Bay and the coal-producing provinces of South Africa last week strengthened coal quotes over 115 USD/t. According to experts, despite the decline in the demand of Indian enterprises for South African material, South African coal prices may grow in the short term due to additional supply restrictions by scheduled repair works by the railway operator Transnet in August.
South African state-owned generating company Eskom announced the start of negotiations with major financial institutions to raise 10 billion USD in exchange for the closure of its coal mines. According to the management of Eskom, the company may suspend the operation of coal assets and invest part of the funds in renewable energy to reduce CO2 emissions. Currently, Eskom emits about 213 t of CO2 equivalent per year. Nevertheless, experts are skeptical about Eskom’s investments in the green energy sector of South Africa, since the company’s current debt reaches 27 billion USD and the funds raised will be used primarily to repay the debt.
The resumption of the operations of the mines in China after the end of public holidays led to a decrease in the price of 5500 kcal/kg NAR coal of domestic production in the port of Qinhuangdao below 152 USD/t.
The lack of Australian coal on the market after the recent accident on the railway line between the Dalrymple Bay coal terminal and the coal-producing provinces of Australia, as well as the growth of demand from Japan and Taiwan, contribute to the growth of quotations over 140 USD/t. Japanese generating enterprises are increasing their purchases of coal after the release of an order from local authorities to ensure a sufficient amount of imported material amid heightened demand for electricity.
The deteriorating epidemiological situation and torrential rains in the south of Indonesia limit the production and export supplies of 5900 GAR Indonesian coal, supporting the indices over 120 USD/t.
Despite the growth of coal production in Indonesia in January-June 2021 to 292.8 mio t (+7.2 mio t y-o-y) market participants believe that due to the ongoing outbreaks of Covid-19, local producers will not be able to export significant volumes of material to the market in the medium term.
A shortage of coking coal of Australian origin in the Asia-Pacific market and the seasonal demand of metallurgical plants boosted prices over 205 USD/t. Expensive metallurgical coal in the domestic market of China forces Chinese companies to increase purchases of Australian coking material from traders in Japan and South Korea, strengthening Australian coking coal quotes.
Source: CAA Analytics
