Coal news and updates

Global thermal, coking coal prices may weaken on Chinese factors

Pace of decline in rates likely to be slow, say analysts

Thermal and coking coal prices are set to weaken in the coming months, though they are expected to rule higher than normal since the pace of the fall in rates will be slow.

Though the coal prices look bullish currently, there is underlying bearishness, according to analysts.

“While our long-term coal price forecasts remain bearish, we expect that the pace of decline will be slower over the period than we previously expected,” said Fitch Solutions Country Risk and Industry Research (FSCRIR) in a commentary. Thermal coal is used for producing electricity, while coking coal is used for making steel.

Coking coal is expected to rule over $310 a tonne during the remainder of the year but Fitch Solutions said slowing coking coal import demand from China will be the main driver of lower seaborne coking coal prices over the current quarter and the first quarter next year.

Analysts say Chinese government plans to keep its crude steel output unchanged next year could put pressure on coking coal prices.

FSCRIR has raised its average price forecast for Newcastle thermal coal this year to $132 a tonne from $85 and for coking coal to $225 a tonne from $165.

It said China’s energy shortage will likely ease during the current and next quarter which would drag thermal coal imports, resulting in weak global prices.

Currently, Newcastle coal futures on Intercontinental Exchange for delivery in January are quoted at $147 a tonne. Prices had skyrocketed to record highs of $269.5 a tonne in October on a surge in energy prices. On Zhengzhou Commodity Exchange, the January futures settled at 806.60 Chinese yuan ($126.49) a tonne on Thursday, a drop of nearly 12 per cent since November 1.

Fitch Solutions said Chinese coking coal prices have begun to weaken from record highs posted in October following Beijing’s intervention in the domestic coal mining and trading sector to improve coal supply.

On Thursday, the January futures contract on Dalian Commodity Exchange, China, was settled at 1,868 yuan ($292.94). Coking coal prices had zoomed to a record 3,995 yuan ($626.35) a tonne in October.