Global thermal coal prices have eased by over 20% since their peak in March 2022, following Russia’s invasion of Ukraine and the subsequent sanctions by the western countries on Russia.
The recent fall in prices has come against the backdrop of strict lockdown restrictions in China over the last two months and weak buying appetite of emerging markets as coal prices traded above 100% since last year.
The factors that have kept prices resilient so far are a series of logistic constraints, adverse weather conditions in the key exporting countries and strong demand appetite of Europe seeking alternative supplies to replace Russian coal.
The resilient price trend amid the ongoing geopolitical tension has resulted in a major shift in trade dynamics in Asia and Europe.
Shipments from key exporting countries
For the first five months of the year, shipments from South Africa have risen marginally by 2% on a yearly basis as logistic constraints caused by disruptions at Transnet Freight Rail Services, affected coal transport to RBCT Port.
European countries and Japan have been the major buyers of South African coal this year, while shipments to India, Pakistan, and China have declined sharply since last year.
Australian exports fell by 3% on a yearly basis in the January-May period amid its elevated prices, which pulled down its demand in the emerging markets. Shipments to Japan and the European market, however, were higher following their sanctions on Russian coal.
Australian exports in the recent months were hit by heavy rainfall in both Queensland and New South Wales. However, a modest rise is expected in exports with the upcoming dry season in the country.
Shipments from Indonesia recorded a marginal rise by 6% in January-March period. Despite competitive prices over other origins, Indonesian exports were majorly capped by the government’s decision to impose a complete ban on coal exports earlier in January and weak demand sentiment from China surrounding rising domestic production and lockdown restrictions in the country.
India, currently, remains the biggest buyer of Indonesian coal with 14.4 mnt imported so far this year as domestic utilities undergo a severe supply crunch in the country.
How will the second half of the year pan out?
With the approaching monsoon season in key exporting countries, global thermal coal supply is likely to fall short of demand in the second half of the year, keeping prices elevated, CoalMint assumes.
Indian buyers may continue booking low-CV coal from Indonesia amid domestic supply shortage while imports from South Africa may take a hit as a recent fall in steel prices has made sponge iron manufacturing unviable at the current prices.
Supplies from Russia are also likely to regain momentum due to its cost effectiveness over other origins.
Europe and Japan, on the other hand, are taking in high-CV Australian supplies.
Chinese traders are likely to raise their purchase of cheaper Russian coal at discounts and supplies from neighbouring Mozambique, while top economic planner NDRC focuses on increasing output and keeping domestic prices within a reasonable range.
Easing lockdown restrictions in China and the sharp rise in coal capacity expansion going ahead is something to look out for.
Leave a Reply