CLYDE RUSSELL: Thermal coal boom may be over for SA as winter supply fears ease

Launceston — The prices of key thermal seaborne coal grades are retreating amid signs that supplies will be sufficient to meet winter demand in both Europe and Asia.

In some cases, the price of coal used mainly in power plants has fallen back to levels close to those that prevailed before Russia’s February 24 invasion of Ukraine, which caused a sharp spike as buyers feared a loss of exports from both countries.

Benchmark Australian 6,000kcal/kg coal at Newcastle Port was assessed by globalCOAL at $373.75 a tonne on Monday, down 6.43% from the close on October 7. The grade, which is mainly used by Japanese utilities, has dropped about 17.5% from the weekly record high price of $452.75 a tonne, reached in the seven days to September 9.

The price of 5,500kcal/kg Australian coal, which is more relevant to buyers in countries such as India, has also been falling, with commodity price reporting agency Argus assessing it at $161.11 a tonne in the week to October 7.

This is down 43.3% from the record $284.20 a tonne, hit in the week to March 11, and not much above the $155.30 that prevailed just before the Russian attack on Ukraine.

Indonesian coal with an energy rating of 4,200kcal/kg, which is largely bought by China and India, the world’s two biggest coal importers, was at $89.75 a tonne in the week to October 7, down 25.7% from its post-invasion high of $120.86, and also not too far above the pre-invasion price of $79.54.

What is also interesting is that the sharp discount on Russian coal exported from the Pacific port of Vostochny has been reversing, suggesting that Russian producers have been able to find sufficient new buyers as traditional customers such as Japan and South Korea trim imports.

Russian coal with an energy rating of 6,700kcal/kg, as assessed by McCloskey, was at $190 a tonne in the fortnight to October 10, gaining 19.9% from its postinvasion low of $158.50, hit in the 14 days to August 29.

This grade has yet to recover to the price level of $226.27 a tonne that prevailed before the Russian invasion of Ukraine, but its recent recovery shows the steep discounts being offered in the months after the attack are likely to be a thing of the past.

SA coal from Richards Bay, with an energy rating of 6,000kcal/kg , has also been softening, dropping to $253.45 a tonne in the week to October 10, down 40.6% from its postinvasion peak of $426.90, while still above the pre-invasion price of $210.79.

SA is a swing exporter between Europe and Asia, and before the invasion the bulk of cargoes had been heading to Asia, with India a top customer. However, Europe’s demand for energy as Russian pipeline supplies of natural gas were substantially curbed boosted SA coal and saw shipments diverted from Asia.

European demand

Europe’s imports of thermal coal were 7.85-million tonnes in September, according to data compiled by commodity analysts Kpler, which was the third highest this year and up 36.3% on the same month in 2021.

The biggest supplier of Europe in September was Colombia with 2.54-million tonnes, followed by SA with 1.42-million and then Russia with 1.48-million.

In September 2021, Russia was the top supplier with 2.49-million, followed by Colombia with 2.15-million, while SA provided a mere 183.093 tonnes.

With Europe expected to ban all imports of coal from Russia, there is still the likelihood that the continent will have to draw more cargoes away from Asia, but it is also possible that Atlantic basin exporters, such as Colombia, the US and Canada, can ramp up shipments.

In Asia, major importers are showing mixed trends, with wealthier countries still willing to pay higher prices, but less developed ones importing less of the polluting fuel.

China’s imports of thermal coal from the seaborne market were 22.4-million tonnes in September, according to Kpler, with Indonesia providing the lion’s share at 19.32-million. China’s thermal coal imports were 21.04-million in September last year.

Japan, the third-biggest coal importer, recorded thermal coal arrivals of 10.41-million tonnes in September, roughly in line with the 10.82-million from the same month in 2021.

In contrast to the steady picture presented by China and Japan, India’s thermal coal imports in September were 12.1-million tonnes, which were the weakest since April, though they were above last September’s 8.68-million.

Reuters