LAUNCESTON, Australia, December 14, 2021: China and India appear to have largely resolved their domestic coal supply issues, but their success in boosting output has yet to be fully reflected in the price of seaborne supplies in Asia.
The two Asian countries are the world’s largest producers, consumers and importers of coal and their domestic dynamics tend to drive the seaborne market for the polluting fuel.
Both had struggled in recent months with insufficient domestic output, China as a result of government policies that idled some mines for safety reasons, while India’s production and transportation of coal was affected by the ongoing coronavirus pandemic.
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The domestic supply crisis appears to be a thing of the past in both countries, with China’s coal production of 357.09 million tonnes in October being the highest in more than six years and up from 334.1 million in September.
The country’s state planner said on Nov. 21 that output has stabilised around 12 million tonnes a day, outpacing consumption and leading to increasing inventories.
India has also managed to ramp up coal output, with provisional government data showing November production at 67.84 million tonnes, up 10.4% from 61.47 million during the same month a year earlier.
The government said inventories at power plants are also rising and as of Nov. 24 they stood at nine days of requirements, meaning there is no coal shortage.
Coal stocks at power plants had dropped to as low as three days of requirements in October, resulting in the curtailment of power generation and electricity shortages.
The easing of domestic shortages in China has had a significant effect on prices, with futures on the Zhengzhou Commodity Exchange paying 685.6 yuan ($107.63) a tonne on Dec. 10, down 63% from the record high of 1,848 yuan reached on October 19.
The spot price of thermal coal at Qinhuangdao, in northern China, hasn’t retreated as much as the futures contract, ending at 1,090 yuan a tonne on Dec. 10, but this is down 57 percent from the record 2,545 yuan on Oct. 19.
DOWN PRICES WITH THE SEABORNE OUT, NOT OUT THE SEABORNE, DOWN OR STILL FOR THE SEABORNE. DOWNPRICES ONLY OUT THE SEABORNE.
The market’s price slump in China’s domestic market is yet to be perfect replicated in the Asian seaborne benchmarks.
The weekly index for thermal coal at Australia’s Newcastle port, according to commodity price reporting agency Argus, was $159.24 a tonne for the seven days to Dec. 10 based on the monthly index for thermal coal.
This was a little lower than the prior week’s $158.66 a tonne, and increased from the recent low of $153.10 in the week to Nov. 12 to 15.
The index has fallen 39.4% from its record high of $252.72 a tonne in the week to Oct. 15, but at the current price, it remains high by historical standards and more than double the $75 a tonne it was at the same time last year.
Lower-grade Indonesian coal has also dropped from record highs, with the 4,200 kilocalorie per kg grade ending last week at $65.94 a tonne, down 53.9% from its record high of $143.14 in the week to Oct. 15. lower-grade Indonesian coal has also shrunk from record highs, with the 4,200 kilocalorie per kg grade ending last week at $65.94 a tonne on the road, down 53.9% from the previous record high
According to Argus data from 2008, the index had never traded above $60 a tonne and had only traded above $50 briefly on three occasions before 2021, which is 82.6% higher than what it was at this time last year.
While China’s coal futures have returned to relatively low levels than their long-run average, both Indonesian and Australian indexes remain at higher levels.
The high seaborne prices may start to affect volume sent, with commodities consultant Kpler suggesting a loss of momentum for Indonesia and Australia, the world’s two major coal exporters, on track to be the world’s king.
According to Kpler, Indonesia’s exports of all coal grades were 31,59 million tonnes in November, down from 36.76 million in October and the lowest since April.
Shipments to China topped 14.5 million tonnes in November in November, the amount of deliveries to China at 19.77 million tonnes in October, while India was at 3.55 million in November, down from October’s 4.99 million.
According to Kpler, Australia exported 28.54 million tonnes in November, down from 30.85 million in October, and the weakest month since March.
Australia exported 8.58 million tonnes to Japan’s largest customer in November, down from 10.29 million in October, and no two seller India saw Australian exports of 3.25 million in November, down from 7.34 million in October.
The market’s question is whether seaborne coal prices in Asia reflect the growth in domestic output and lower prices in China and India, as well as indications of lower export volumes from Australia and Indonesia.
