With almost six months into the Russia-Ukraine conflict and the subsequent sanctions by various countries, global thermal coal prices of mid-calorific value have eased considerably from their peak levels.
Discounted high-CV Russian 6000 kcal/kg NAR grade coal that has been available in the Indian market at $185-190/t CFR India basis and Russian 5500 kcal/kg NAR grade in the Chinese market at $150/t CFR China have largely affected prices of mid-to-low CV grade prices of other origins like Indonesia, Australia, and South Africa.
As per CoalMint assessment, South African and Australian mid-CV grades have eased over 20%, while that of Indonesian coal, weak Chinese demand has pulled down its prices by 16% since the Russia-Ukraine conflict.
Prices comparison
*Price in $/t
Global coal trade flow
According to the current market dynamics, cost-competitive Russian coal has successfully managed to capture the key buyers of thermal coal in China, and India.
Indian buyers have increased their purchase of high-CV Russian coal, making way for its larger use in the domestic sponge iron and cement industry. While Chinese traders have opted for the same for usage in power sector.
Subsequently, the demand for mid-CV South African and Australian coal that was used by sponge iron and cement sector respectively also have come down while that of mid-CV Indonesian coal from the Chinese power sector also recorded a drop.
Other Asian buyers such as South Korea and Taiwan, on the other hand, also have brought in Russian cargoes in past few months for their power plants, contrary to their commitment to restricting imports from the country. In fact, South Korea’s thermal coal imports from Russia touched its 23-month high in July at 1.90 mn t.
Europe’s demand for high-CV grade keeps prices high
With elevated LNG prices globally and a constrained supply situation from Russia, European countries continue to remain dependent on coal for their power generation.
Market experts claim, that even with record high levels of coal prices this year, it is less expensive than gas, which is likely to boost its imports in the coming months, mainly for the high-CV variety.
Robust European demand this year has lifted South African high-CV 6000 kcal/kg NAR grade coal prices to $340/t FOB basis, up by 111% from Jan’22, and 152% on a y-o-y basis.
Australian high-CV 6000 NAR has risen to $430/t, up by 152% since Jan’22, and 227% higher on a y-o-y basis.
Boosting higher Australian coal prices in the Asian market, Japan’s Tohoku Electric Power last month signed a long-term contract with Glencore at $375/t for 2022, from $110/t for 2021.
Short-term outlook
With the renewed trade dynamics, global thermal coal prices for high-CV grades are likely to remain elevated amid strong demand from Europe, Japan, Taiwan, and Korea. However, cheaper Russian coal availability in China and India may continue to keep other-origin mid- to low-CV prices within a reasonable range.
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