Coal Prices
- Premium Low Vol (FOB Australia) $367.00/mt (0.00)
- CFR China PLV equivalent (Oct ’23) $319.50 (-3.50)
- PLV China Netback $282.30 (-0.05)
- PCI (FOB Australia) ~$205.00 (0.00)
- Low Vol HCC (USEC) $272 (0.00)
- High-Vol A (USEC) $292.50 (-2,50)
- High-Vol B (USEC) $245.00 (0.00)
- CFR South China (5,500) $121.10/mt, (+0.10)
- Kalimantan (4,200) $60.35 (+0.15)
- FOB Newcastle (6,000) (Oct ’23) $143.75 (-0.10)
- FOB Newcastle 20% Ash (5,500) $109.30 (0.00)
- CFR India West (5,500) $124.65 (+0.05)
- CIF ARA (6,000) $153.00 (+7.50)
- Richards Bay (5,500) $120.30 (+8.30)
- Baltimore 3% Sulfur (6,900) $93.25 (+1.50)
- Hampton Roads 1% Sulfur (6,000) $119.05 (0.00)
BNSF Train Derailment in Colorado
On October 16, 2023, a BNSF coal train derailed off a bridge over Interstate 25 near Pueblo, Colorado, causing the bridge to collapse and resulting in the tragic death of a semi-truck driver. The incident involved 30 BNSF coal railcars. At least ten train cars slid off the tracks and over the side of the bridge. Fortunately, no crew members were injured. The exact cause of the derailment is yet to be determined. The National Transportation Safety Board (NTSB) is investigating the crash to determine its cause. Pueblo, located about 100 miles south of Denver, is a crucial hub for transporting coal from various regions. The interstate in the area was closed for an extended period, leading to necessary detours. Secretary of Transportation Pete Buttigieg has been in contact with Colorado Governor Jared Polis regarding the incident.
Thermal Coal News
Neutral: The Asian thermal coal market is cautious due to reduced buying interest from China and India. Chinese buyers are less aggressive, focusing on high-calorific value coal. Indian demand is softening and is expected to remain subdued until after Dussehra on Oct. 24. Coal supply issues in China are improving. Australian high-CV coal demand remains strong. Approval for additional production quota in Indonesia is uncertain. A potential resolution for issues at Samarinda port is expected soon. Sellers aim to avoid holding cargoes. The Indonesian government lowered October’s thermal coal reference price.
Bearish: Indonesia reduced its October thermal coal reference prices by 7% on average for all grades. The 6,322 kcal/kg GAR high-grade thermal coal saw a 6.89% decrease to $123.96/mt. Miners find the new prices closer to export values. The HBA guides Indonesian coal product prices and royalty payments for exports. The pricing formula considers actual selling prices from the preceding two months. Despite some criticism, the government doesn’t plan to alter the methodology. In September, FOB prices for 4,200 kcal/kg GAR and 5,000 kcal/kg GAR were $53.53/mt and $73.28/mt, respectively.
China’s coal production is anticipated to decrease to around 4.2 billion tonnes in 2030 after reaching its peak in 2027. In 2022, China produced 4.56 billion tonnes of coal. Coal consumption has been on the rise since 2000, particularly during the 13th Five-Year Plan period, increasing from 3.84 billion tonnes in 2016 to 4.34 billion tonnes in 2022. The country aims for peak coal demand at 4.5 billion tonnes, projected to drop to around 4 billion tonnes by 2030. The focus is on transitioning towards cleaner and more efficient coal utilization, targeting a net efficiency of coal-fired power generation surpassing 50% by 2030. This is expected to save 800 million tonnes of coal equivalent and reduce carbon dioxide emissions by 2 billion tonnes. A comprehensive, clean, and efficient coal utilization system is set to be established by 2035, with a utilization rate exceeding 90%.
In September 2023, total coal traffic at Indian ports, including coking and non-coking coal, reached 28.82 million tonnes (mnt), marking a 13% increase from August’s 25.62 mnt. Non-coking coal traffic surged by 23% to 23.57 mnt, while coking coal traffic declined by 18% to 5.25 mnt due to low cargo availability. The boost in coal traffic is attributed to increased thermal coal imports (24% rise to 14.93 mnt), driven by heightened power demand ahead of the festive season and a shift by Indian cement companies to Indonesian high-CV material for cost advantages. Paradip Port recorded the highest thermal coal traffic at 4.13 mnt in September.
China is set to establish coal production capacity reserves in Inner Mongolia to ensure a stable supply during peak demand. This initiative is part of a broader effort by the State Council to accelerate the construction of coal reserve capacity across the country, focusing on key mining hubs, railway stations, ports, and consumption areas. This scheme, initially proposed in 2011 and reiterated in 2021, aims to regulate coal production and distribution.
Bullish: Vietnam’s state-owned coal producer, Vinacomin, plans to nearly double coal imports in 2024, aiming for 16-17 million tonnes, up from an anticipated 9 million tonnes in 2023. This increase aligns with efforts to meet growing demand from utilities. Vinacomin will conduct imports through tenders, having shortlisted 15 coal traders to participate. This decision comes as Vietnam faces challenges in expanding domestic coal production, primarily due to costly underground mining and government price controls. Vietnam’s domestic coal output declined from 37.7 million tonnes to 36.6 million tonnes in Jan-Sep 2023, further supporting the need for imports.
Metallurgical Coal News
Neutral: Asian metallurgical coal prices remained steady on October 16, with market participants cautious due to uncertainty in price directions. The benchmark Premium Low-Vol Hard Coking coal was assessed at $367/mt FOB Australia, and the delivered CFR China price was $297/mt CFR China, both unchanged from October 13. In the CFR China market, prices remained rangebound as concerns over weakening mill margins persisted. Despite deteriorating mill margins, domestic coking prices were not expected to correct due to tight supply, providing support for seaborne coal prices. The outcome of the third round of met coke price increases in China could potentially impact coke production and consequently exert pressure on domestic coking coal prices. Shanxi Anze premium low-sulphur met coal prices in China softened by RMB 100-150/t to RMB 2,250/t ex-washery, equivalent to $301.95/t CFR China. This decline is attributed to softening demand amid ongoing maintenance at steel mills.
Australian metallurgical coal producer Stanmore Resources reported a 6% increase in saleable production for July-September 2023 compared to the same period last year, reaching 3.4 million metric tons (mt). The company attributed the growth to expanded shipping logistics capacity, which helped counteract challenges in the rail network and haulage in the Bowen Basin. Stanmore Resources acquired South Walker Creek and Poitrel mines in 2022, broadening its production base. Despite favorable weather, maintenance and production issues constrained prime hard coking coal availability. The company is working on expanding South Walker Creek’s production capacity for completion by early 2025.
Canadian metallurgical coal miner Teck reported sales of 5.2 million metric tons (mt) in the third quarter, falling below its previous guidance range of 5.6-6.0 mt. This was due to slower-than-expected supply chain recovery after British Columbia’s wildfires, labor disruptions at the province’s ports, and plant challenges. Teck’s announcement follows similar warnings from Alpha, Arch, and Coronado, collectively indicating a reduction in availability for the third and fourth quarters. These developments are likely to contribute to firm prices in the metallurgical coal market for the remainder of the year.
Ramaco Resources (METC) provided updated guidance for Q3 2023, anticipating a net income range of $18-$20 million, or adjusted EPS of $0.42-$0.45/share, with an adjusted EBITDA of $43-$45 million on sales of 996 thousand short tons. The expansion of processing capacity at its Elk Creek preparation plant was completed, enabling continuous operation at an annualized capacity of 3.0 million short tons. The company also achieved its target of a rateable annualized sale run rate of approximately 4 million short tons. For the full year, sales guidance is raised to 3.25-3.50 million short tons, with an estimated cash mine cost in the high $90s per ton range for Q4. METC has committed sales of about 3.3 million short tons year-to-date, with 2.9 million short tons fixed at an average price of $173/ton. Overall coal inventory levels decreased almost 40% in Q3. METC expects further reduction in inventory levels for Q4.
Steel & Iron Ore News
The Chilean government plans to invest $74 billion in its mining sector over the next decade, targeting 53 projects between 2022-2031, including both greenfield and brownfield ventures. This initiative aims to diversify mining activities beyond copper and boost lithium production through joint ventures with private investors. Chile is the second-largest global producer of lithium and holds 36% of the world’s reserves. The government is also focusing on increasing copper output, aiming to return to pre-pandemic production levels. Additionally, Chile is working towards achieving carbon neutrality in mining by 2050 and is developing its hydrogen production capabilities with the goal of becoming a major hydrogen exporter by 2040.
Power & Energy News
China’s compliance carbon price reached a new high at $11.25/mtCO2e on October 12, but fell to $11.17/mtCO2e on October 13. This represented a 5.4% increase from the previous trading week. The weekly trade volume of compliance emission allowances (CEAs) surged by 244% to 25.83 million mtCO2e. Different vintage CEAs had varying daily weighted average prices, ranging from Yuan 79.97/mtCO2e to Yuan 80.31/mtCO2e. Additionally:
- China is set to conduct a 6-month simulated trading of CEAs for cement companies, starting in November, to prepare for actual emission trading.
- China has outlined plans to support the development of nature-based projects and high-quality carbon credits in the domestic voluntary carbon market.
- PetroChina International Co. Ltd completed its inaugural carbon credit transaction in Japan’s newly-established, state-backed carbon credit market.
Neutral to Bearish: The Australian Bureau of Meteorology predicts a below-average number of tropical cyclones for the 2023–24 Australian tropical cyclone season, influenced by the El Niño event. In the Eastern region, where most of the country’s coal production is located, there’s a 76% chance of fewer cyclones than average. This forecast suggests a reduced likelihood of supply disruptions, allowing the Australian coal industry more time to recover from various production setbacks in recent years.
Bearish: President Joko Widodo of Indonesia is planning to explore partnerships with China in renewable energy and infrastructure projects during his upcoming visit to the Belt and Road Forum in Beijing. This move aligns with Indonesia’s existing $20 billion Just Energy Transition Partnership (JETP) aimed at decarbonizing the country’s energy sector, led by a U.S.-led group of countries. Indonesia, committed to achieving net-zero greenhouse gas emissions by 2060, views China as a potential partner due to its expertise in renewable energy development and substantial hydropower resources. The country is expected to announce its investment plans for JETP next month.
Bullish: In September, China experienced a significant 9.9% year-on-year increase in power consumption, but saw an 11.8% month-on-month decline, totaling 781.1 billion kWh, as per data from the National Energy Administration (NEA) released on October 16. Over the period of January to September this year, the country’s power consumption reached 6,863.7 billion kWh, marking a 5.6% increase from the previous year.
Shipping News
Neutral: On October 16, Asia-Pacific Panamax freight rates saw a slight increase due to higher bunker prices, though the market was slow with little urgency for fixtures. There was still a gap between bid and offer levels. Notable fixtures included a metallurgical coal cargo from Australia to India and various coal cargoes to China. For Asia-Pacific Supramax freight rates, there was a modest uptick on October 16, primarily driven by higher bunker prices. The market was subdued, with Pacific owners showing some flexibility in their offer levels. Fixtures included coal cargoes from Indonesia to China and India.
In the Pacific Handysize market, rates remained largely unchanged on October 16. Freight rates saw a minor increase due to higher bunker prices, but the market was flat overall. Notable fixtures included an alumina cargo from Australia to India. Overall, the market sentiment varied across different vessel classes, with some areas experiencing increased activity and others remaining sluggish.
