September 10, 2022 - Last week on the European thermal coal market, quotations fell below 345 USD/t amid the European Commission’s initiative to cap prices for Russian gas (to 50 EUR/MWh) and crude oil, despite EU authorities holding different views on the issue. Also, to combat the energy crisis, the EC proposed the following measures: reduction of demand for electricity; solidarity tax for generating companies using fossil fuels; income limits for low-cost power producers (nuclear power plants, renewables, lignite) and financial support for energy companies, including the provision of loans.

South African High-CV coal prices dropped below 310 USD/t, following the European indices. In addition, it was reported that a legal dispute between South African rail operator Transnet and China Railway Rolling Stock Corporation (CRRC) was resolved. The agreement will provide spare parts and locomotive traction for the South African rail network and improve its throughput capacity in the coming months.

In China, spot prices for 5500 NAR at the port of Qinhuangdao strengthened during the week to 192 USD/t on the back of reduced supply in the domestic market due to lower production and logistical constraints, caused by another outbreak of Covid-19 in some regions of the country. Market participants note that these factors will persist and support indices until the end of October, when the XX Congress of the Communist Party of China will be held, ahead of which a number of safety inspections at mines is expected to be increased.

According to the country’s customs authorities, in August 2022 China imported 29.5 mio t of coal and lignite (+25% m-o-m and +5% y-o-y). This trend is driven by higher electricity demand and lower hydropower generation. In July 2022 imports increased to 23.5 mio t. (+24% m-o-m).

Indonesian 5900 GAR gained 5 USD/t and amounted to 184 USD/t as a result of stronger demand from Chinese and European consumers. Some traders mentioned a stable level of consumption by South Korea. Moreover, the supply of Indonesian material is expected to remain tight, given heavy rains and a shortage of barges for coal transportation.

High-CV Australian 6000 coal prices continued strengthening above 450 USD/t on higher demand from Europe and the Asia-Pacific, as well as lower coal shipments at Newcastle port last week caused by adverse weather conditions. In addition, maintenance works of ship-loaders at a number of terminals is expected next week, that will have a negative impact on the speed of bulk carriers handling.

Australian metallurgical coal indices adjusted to 273 USD/t, coming under pressure on worsening spot market demand, stemming from a discussion in Europe on blast furnace closures at steel mills to reduce energy costs.