Prices for seaborne thermal coal have started to drop as fears of a winter energy crunch ease, but the rate of decline has varied across the different grades of the polluting fuel.
The divergence of prices for coal used mainly in power plants largely reflects the circumstances in the major importing regions of north Asia and Europe and how they are adapting to ongoing disruptions to energy markets in the wake of Russia’s Feb. 24 invasion of Ukraine.
The often cited Asian benchmark price of Australian coal at Newcastle port dropped last week to $364.63 a tonne, according to an assessment by commodity price reporting agency Argus.
That is down 17.7% from the all-time high of $442.89 a tonne for the week to Sept. 9 but still more than double the price that prevailed this time last year.
The weekly index is a price for Australian coal with an energy content of 6,000 kilocalories per kilogram (kcal/kg), a higher quality fuel mainly used by utilities in Japan and South Korea.
That means it reflects only a small percentage of the total seaborne thermal coal market. The volume of spot and short-term deals driving the price assessment is limited and concentrated among a small number of sellers and buyers.
A better reflection of Australian coal is provided by the Argus API5 assessment for 5,500 kcal/kg coal API5IDXWKY=ARG, which is bought by customers in India and other Asian nations, such as Vietnam.
This grade ended last week at $143.11 a tonne, down almost 50% from its record high of $284.20 in the week to March 11, when the market was concerned about the potential loss of Russian exports to both Europe and Asia.
Outside of Australian coal, the seaborne thermal prices that are retreating are those linked to Europe, with coal from South Africa’s Richards Bay API4DXDLY=ARG dropping to $169.44 a tonne on Nov. 9, down 56% from its all-time high of $385.94 on Aug. 22.
Coal for delivery to northwest Europe ended at $177.29 a tonne on Nov. 9, a decline of 58% from its peak of $424.97 on June 23.
RUSSIA HOLD UP
The decline in prices for Australian and South African coal and for coal delivered to Europe is largely a reflection that fears about Russian supplies have largely been overstated. Coal exports from the world’s third-biggest shipper have held up in recent months, albeit with some shifting among buyers.
Russia exported 10.93 million tonnes of thermal coal via ships in October, the most since July’s 11.66 million, according to data compiled by commodity consultants Kpler.
In Asia, China was the biggest buyer, taking 2.83 million tonnes, while Russia’s exports to Japan were just 370,419 tonnes, down from levels around 1 million a month in 2021.
In Europe, Turkey was the biggest buyer, with purchases of 1.71 million tonnes, while shipments to the Netherlands and Germany were assessed as zero, down from 1.08 million and 462,148 in the same month in 2021.
The price for Russian coal at the Pacific port of Vostochny, as assessed by McCloskey, rose to $194.79 a tonne in the fortnight to Nov. 7, up 23% from its post-invasion low of $158.50 in the period ended Aug. 29.
In contrast to price declines for other seaborne thermal coal, Russian cargoes in Asia have been gaining as the large discounts being offered come to an end amid signs that Russia has been able to find new buyers in China and India to replace lost volumes in Japan and South Korea.
Another coal grade that isn’t experiencing price declines is Indonesian 4,200 kcal/kg fuel, a grade popular in China and India, the world’s two biggest coal importers.
Singapore-traded contracts S42CFc1 ended at $89.43 a tonne on Nov. 9, down slightly from a recent peak of $94.99 on Oct. 31, but also above the $74.63 on Aug. 5, which was the weakest price since late January.
Overall, the seaborne thermal coal market is showing the prices with the most exposure to Europe are declining, while those linked mainly to China are holding up.
Source: Reuters
