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Friday, 29 October 21
APAC THERMAL COAL SUPPLY TO REMAIN TIGHT AS WINTER LOOMS - FITCH RATINGS
Fitch RatingsAPAC thermal coal prices have surged, hitting historically high levels. The benchmark Newcastle 6,000kcal/kg grade coal reached USD228/tonne in mid-October, roughly triple the price from December. Fitch Ratings says in a new report that the high prices are largely driven by tight supply across the region and low inventory levels in China and India, along with strong natural gas prices as an alternative energy source. Major Asian countries' imports increased by 1.5% yoy in 8M21, although China's imports declined by 3.7% yoy in 9M21 with metallurgical coal more affected than thermal.
 
China's benchmark Qinhuangdao 5,500kcal/kg coal price has tripled so far this year, reaching around CNY2,300/tonne in mid-October and gaining over 100% since only September. Domestic production marginally picked up 1.2% qoq in 3Q21 as August-September output rebounded to 33.5 million tonnes (mt) per month from 31.4mt in July. Demand has remained strong, too. Thermal power generation rose by 11.9% in 9M21 on the economic recovery, strong exports and lack of growth in hydropower.
 
China has raised the production quota of 153 mines since September. These mines can contribute an incremental 50mt or more in 4Q21. Production increased above 11.60mt on 18 October, the highest level this year, from an average 11.14mt a day in September. Still, supply could remain tight in 4Q21, as daily production in November-December could be little more than 1.0mt higher than September from past experience. The National Development and Reform Commission (NDRC) has also flagged its intention to intervene on prices.


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