Coal news and updates

Chinese thermal coal demand tapers off as COVID-19 lockdowns hit again: sources

Chinese thermal coal demand is expected to be bearish in the near term, as the country imposed movement restrictions in various regions amid rising COVID-19 cases, a development which is likely to soften Asian coal prices, market sources told S&P Global Commodity Insights March 16.

The COVID-19 case count in China surged to its highest level since the beginning of the pandemic in 2020, which may curtail demand for thermal coal as several industries shut operations due to the lockdowns, sources said.

Market sources expect Indonesian coal prices, which saw a bull run in the week to March 11 due to robust European and China demand amid the Russia-Ukraine conflict, to ease due to weakening Chinese demand and stable domestic production.

“The market is bearish because the Chinese demand is not there and without that demand, the price wouldn’t sustain at such high levels,” an Indonesia-based trader said.

The effect has already been witnessed so far this week as elevated Indonesian coal prices started to come off. The Kalimantan 4,200 kcal/kg GAR price has fallen a little over $11/mt to $124.95/mt FOB since March 14, according to S&P Global data. The price had risen by $58.95/mt from Feb. 23 to $136/mt March 11.

While China, which over the years has strengthened its domestic coal production and lowered import dependence, is likely to see subdued local demand, market participants expect Chinese buyers to import a larger share of coal from Russia than earlier as the latter’s coal is being offered at a discount compared with other coal origins for similar grades due to the war.

For instance, the Russian 6,000 kcal/kg NAR price was assessed at $255/mt FOB March 11, whereas the Newcastle 5,500 kcal/kg NAR price was assessed at $297/mt, according to S&P Global data.

According to market estimates, China imported nearly 40 million mt coal from Russia in 2021.

Qinhuangdao port stocks were at 5.05 million mt March 14, up from 4.92 million mt Feb. 28, according to sources. China’s coal and lignite imports were at 35.39 million mt over January-February, down 14% on the year.

Meanwhile, sources said that Chinese buyers have started bidding about $15-$20/mt lower than the offered price for Indonesian coal as they look to drive the prices lower.

However, tight supply and disruption in global coal markets because of Russia’s invasion of Ukraine may keep prices at a level that may still be considered elevated for many buyers, sources said.

“We have to remember that the supply is still tight. There is still a shortage of barges, and mines are still struggling with backlogs and lower production due to rains,” an Indonesia-based producer said.