World coal market: brief overview (July 19, 2021)

Last week, coal prices in Europe climbed to their highest level in a decade, exceeding 135 USD/t. Limited supplies of the material and rebounding electricity usage amid heat waves in a number of EU countries lifted coal demand. TTF gas indices increased to 34.4 EUR/MWh (+2.0 EUR/MWh to July 07, 2021), which has a positive impact on coal prices. Low wind output in the EU at the level of 870 GWh (+200 GWh to July 07, 2021) contribute to the growth in coal quotes. ARA coal stocks totaled 4.7 mio t (-0.05 mio to July 07, 2021). The situation in South Africa indirectly provides additional support to world coal prices (see below).

On July 14, 2021, the European Commission presented a large-scale program “Fit for 55” to combat climate change. Its goal is to reduce CO2 emissions in the EU till 2030 by at least 55% compared to the levels of the 1990s. The proposed measures are designed to cut emissions in all segments of the European economy, including electricity generation, the automotive and housing industries. One of the key points of the reform is the introduction of a cross-border carbon regulation mechanism, which provides for levying fees on imported EU goods depending on their carbon footprint. As part of the first three-year stage of the mechanism beginning in 2023, the import of steel, cement, fertilizers and aluminum will be subject to fees. The program is awaiting approval from the European Parliament and the EU Council.

South African coal prices continue to grow above 120 USD/t amid limited supplies of the material to the international market. On July 13, 2021 civil protests in South Africa, caused by the detention of former President Jacob Zuma, led to the complete suspension of the port of Richards Bay and forced the railway operator Transnet to declare a force majeure. On July 14, 2021, shipments from the port of Richards Bay resumed, but in a limited mode against amid strict security measures. According to experts, restrictions on the transportation of coal by rail and export from the port will remain for most of the month due to the unrest in the country, the recent accident on the railway line connecting the coal provinces of South Africa and the port of Richards Bay as well as scheduled maintenance of the railway within July 20-26, 2021. Richards Bay coal stocks decreased to 3.3 mio t (-0.1 mio t to July 07, 2021).

The prices for 5500 kcal/kg NAR coal of domestic production in the port of Qinhuangdao remain at the level of 150-152 USD/t. The limited supply of thermal coal in the domestic market of China and the growing demand for electricity support the indices. On July 11, 2021, Henan province suspended shipments of coal due to the flooding of railways. The authorities expect an increase in electricity consumption since in many regions of China the average daily temperature exceeded 37 degrees.

Speculations in the paper market decreased the price of Australian thermal coal below 145 USD/t. According to experts, Australian coal quotes, hitting multi-year highs, may continue to grow due to the shortage of high-calorific thermal coal in the Asia-Pacific market.

The suspension of a number of mines owing to the deteriorating epidemiological situation in southern Indonesia reduces the volume of coal production and exports, supporting the indices over 102 USD/t.
Seasonal demand for Australian coking coal from metallurgical plants in the Asia-Pacific region amid a want of imported coking coal in the region had a positive impact on the dynamics of Australian coking coal prices above 210 USD/t.

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