World coal market: brief overview

Over the past week, European thermal coal quotations hit new historic highs again amid limited supply on the global market and Russia’s ongoing military operation in Ukraine. Russian coal shipments have decreased since the start of the conflict in Ukraine. Shipping data show that coal continues to be supplied from Russian ports to Europe, but some major energy companies, including Centrica, Vattenfall, Orsted, and BP, have taken a wait-and-see approach to buying Russian coal, fearing further sanctions. In fact, global coal markets became the object of an experiment on the hypothetical withdrawal of 1/6 of the supply, accounting for the share of Russian coal in the world market, that led to an unprecedented rise in prices, which may intensify, at least in the short and medium term. As of March 09, 2022, the indices surged above 415 USD/t, subsequently correcting to 360 USD/t. Coal stocks at ARA terminals decreased to 3 mio t (-0.1 mio t w-o-w).

South African prices continued to rise above 410 USD/t, primarily on the back of the conflict between Russia and Ukraine. European consumers began to actively turn to suppliers from South Africa, but shipments from this region are severely constrained amid continuing problems with the Transnet railway line, connecting the coal-producing provinces of South Africa and the port of Richards Bay. Due to the current logistical issues coal supplies from South Africa in March 2022 may be reduced by 40%.
In China, spot prices for NAR 5500 climbed by almost 50 USD/t up to 235 USD/t FOB Qinhuangdao. Quotations of thermal coal in the Chinese domestic market also continued to soar. In the current situation of limited supply and progressive price growth, China’s National Development and Reform Commission (NDRC) announced plans to accumulate coal inventories of 200 mio t, increase gas storage by 5 billion m3 and build up electricity reserves to 30 GW. NDRC also plans to lift coal production to keep prices down. According to NDRC FOB 5500 spot prices should be capped at 142 USD/t and 110/t for 5500 ex works (EXW).

Australian quotes rose above 410 USD/t, following the global trend of surging coal indices, driven by limited coal supply. European consumers are trying to replenish coal stocks given the shortage of material in the Baltic Sea. However, supplies from Australia are hampered by logistical disruptions caused by heavy rains and storms as a result of La Nina weather phenomenon.

Indonesian 5900 GAR jumped to 270 USD/t, adding 110 USD/t for the week, caused by fears of further cuts in Indonesian export supplies. Indonesian Ministry of Energy and Mineral Resources announced that it will more closely monitor the fulfillment of commitments to supply coal to the domestic market. The ministry instructed the state energy company PLN to monitor the volume of deliveries, transportation and coal unloading at destinations. In 2022 the supply of Indonesian material on the world market is likely to remain tight, that may lead to further increase in global coal prices.

The shortage of metallurgical coal supply on the world market amid heavy rains, storms and floods in Australia, as well as attempts of global consumers to replace volumes of Russian material, strengthened Australian coking coal indices to 650 USD/t.

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