Continuous fall in global crude oil and gas prices is exerting pressure on South African coal. Currently, offers have plummeted at 4-year low.
At present, oil prices have collapsed to below USD 45 per barrel for the 1st time in past 6 years. Prices have slumped by 60% compared to Jun’14 oil prices. Slipping oil prices is a good news for producers in terms to reduce their production cost. On the other hand, continuous decline in global crude oil and gas prices are directing European producers to change their energy sources.
South African coal prices have hit its 4-year lowest level. RB 1 (6000 NAR) & RB 2 (5500 NAR) are being offered at USD 70-71/MT and USD 65-66/MT, CFR East Coast India respectively. Meanwhile, market has weakened; prices have fallen by USD 2-3/MT compared to last week’s trade prices. However, Indonesia coal prices have also declined and 4200 GAR grade is being offered at USD 43-45 /MT, CFR West Coast India.
One market participant highlighted, “Constant decline in crude oil prices is influencing European manufacturers to focus on their energy alternatives and shift energy sources from coal to oil.”
International coal prices are declining persistently, at this time, market seems to be weakened and not seeking any hope to strengthen further, as coal market is trending lower with falling forward prices. It is expected that coal prices will go down even more on the grounds of falling crude oil prices and sluggish demand in Asian as well as European market.
Declining Crude Oil Prices lead to fall in Vessel Freight
80% of world trade is done through sea. Importers are getting benefit with current plunge in oil prices globally as large chunk of freight comprises of oil charge. Declining oil price has reduced shipping cost, which also reduced the freight charges to India.
- US, one of the world’s largest consumers of crude oil from OPEC Nations, has decreased their purchase by 60% since 2008, which has increased supply in the market.
- Slowdown in China’s economy has lessen the movement of dry bulk cargo, which has led to fall in vessel demand.
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