Amid the increased power demand, especially in developed countries post Covid-19 and multi-year high thermal coal prices, the trajectory of global supply is likely to play a crucial role hereon.
As almost all thermal coal exporting countries have been witnessing supply constraints since the beginning of this year, many are resorting to higher output plans for the second half of 2021 while few are likely to be constrained by unforeseen events.
Indonesia targets increased production
Despite the rising number of Covid-19 cases currently and the supply constraints within the country, Indonesia, one of the key exporters of thermal coal to Asian countries, is likely to significantly increase its coal output during the remaining period of 2021.
The government has set its coal output target of 625 million tonnes (mn t) in 2021, wherein, in the first six months of the year, this reached 292.9 mn t, up 8% y-o-y, Indonesian energy ministry data showed.
The country’s Jan-Jun’21 coal output, equated to only 47% of its annual target of 625 mn t as adverse weather conditions since the beginning of this year decelerated coal production from the key mining regions.
China to boost domestic production
Beijing’s coal output is also set to increase by the second half of this year as miners have set up advanced mining capacity and are ramping up output to meet the rising power demand. NDRC has announced plans to release over 10 mn t of coal from state reserves to fill the supply shortage.
It aims to add almost 110 mnt/year of coal production capacity in H2CY’21 and would build over 120 mn t of coal stockpile in government deployable reserves and 400 mn t of commercial coal reserve capacity by end-2021.
Russia’s focus on improvement in rail services
Although coal supplies from Russia have been hampered since last week due to suspension of the Trans-Siberian railways following bridge collapse amid heavy rains, the country has planned to spend more than $10 billion on a railroad that would ramp up its coal exports to Asia.
In 2021 the key mining companies of Yakutia plan to increase coal extraction to 39 mn t and by 2024 – up to 80 mn t.
CoalMint data reveals, Russia’s coal production increased by 7% y-o-y to 209.24 mn t during Jan-Jun’21. The country has emerged as one of the key thermal coal suppliers to China in 2021 and is making constant efforts to increase its supplies to India and its neighbouring countries.
Colombia output to pick up post-Covid
In a bid to reactivate Colombia’s economy following the Covid-19 pandemic, president Ivan Duque is determined to expand the country’s coal mining and bolster output in H2CY’21.
Though the country’s coal production fell 28% y-o-y to 13.9 mn t during Jan-Mar’21, impacted by fluctuations in coal prices and the pandemic, the same is likely to rebound by the latter-half of the year amid increased demand and also with unrest surrounding the Cerrejon mine workers subsiding.
South African supplies to remain subdued
Thermal coal supplies from South Africa have been under pressure since the start of 2021 either due to Transnet’s maintenance work, train derailments at key railway lines, cable theft, or shortages of locomotives and parts.
Recently, following the civil unrest at South Africa’s KwaZulu-Natal (KZN) province related to the jailing of former president Jacob Zuma, and the ongoing force majeure at all the terminals in the country, including Richards Bay and Durban, due to a massive cyber-attack, coal output and export prospects look largely uncertain in the short term now.
Market participants expects major South African coal miners to reduce their production guidance this year due to the ongoing disruptions while many mid and small-sized miners are heard to have reduced production or shut shop due to financial constraints.
Australian coal output likely to get hampered
There have been no major supply constraints for Australian coal in the first half of 2021.
However, the country is set to experience above average rainfall over Aug-Oct’21 and could see the La Nina weather event emerging later in the year. La Nina is normally associated with increased rainfall which is expected in east Australia where the country’s majority of thermal coal mines are located. This would ultimately hamper coal output and exports in H2CY’21.
Outlook
On the demand side, with increased supplies and passage of summer season in north east Asian countries, excess demand for thermal coal may also subside, giving the much-required break to surging prices globally, especially starting September.
CoalMint believes that a balanced supply-demand equation is likely to affect thermal coal prices in the latter half of this year, and may even lead the rally to ease as well.
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