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Atlantic coking coal: Prices steady amid tightness
US coking coal prices have ended the week unchanged, as tightness in spot availability across the low volatile and high volatile segments have continued to support prices, despite some buyers holding off as they take stock of the recent price weakness in Asia-Pacific. The Argus-assessed US low volatile coal price is unchanged at $162/t fob Hampton Roads, in line with the latest cfr China deals, as any European spot requirement is fulfilled by lower-priced Australian coals. The high volatile A and B prices are stable at $156/t fob Hampton Roads and $137.50/t fob Hampton Roads, respectively, after rising by $1/t yesterday on the back of supply limitations. Overall spot tightness among major suppliers has meant that market indications for high-vol A remain in the mid-$150s/t, with one US miner indicatively expecting $158-160/t fob Hampton Roads if it had any volumes to offer. A European steelmaker was heard to be seeking 70,000t of April-loading high vol A for its eastern European operations, but it is unclear if this requirement has been met. A European mill recently secured a second-quarter loading high vol A cargo at a 4pc discount to the index price, but details could not be confirmed.
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The lack of availability in high vol A is expected to lend support to miners with high vol B volumes to offer. "Buyers who can't get high vol A are naturally going to look to high vol B, and I expect prices will go up towards $140/t," said one US miner.
Met coke offers into Europe have been increasing, while Chinese met coke plants accepted a 100 yuan/t drop in prices on higher stock levels. "A few weeks ago, there were no met coke offers, now there are several unsolicited offers but at very high levels," said a European mill.
US low-vol output recovers, highvol falls further
US coking coal production fell by approximately 20pc in 2020, based on a survey of a number of US mining firms comprising the bulk of US coking coal production, Mines Safety and Health Administration (MSHA) data show. Production of high-volatile coals fell by 20-25pc, while the low-volatile segment fell by approximately 10-15pc, as mining firms responded to depressed pricing and weakened steel and coking coal demand caused by the Covid-19 pandemic. In the high-vol segment, Blackhawk's Hampden complex remained idled throughout the year, and Peabody closed its Shoal Creek mine for six months at the start of the first quarter.
In the fourth quarter, spot opportunities resulting from China's restrictions on imports of Australian coal drove a recovery of low-vol production to 2019 levels, an increase of approximately 10pc compared with the previous quarter. It is likely that low-volatile production will continue to rise in 2021, as Chinese buyers have expressed an interest in term deals for US coals.
Coronado raised low-vol production at its Buchanan mine by 65pc to 1.07mn t in the fourth quarter. By the end of 2020, four Capesize cargoes — approximately 650,000st or more — of Buchanan coal had been booked to ship to China in the first quarter of 2021. Production of premium low-vol coal at Oak Grove in Alabama increased by 23.6pc on a quarterly basis to 459,522st in October-December. Several Oak Grove cargoes have sold to Chinese buyers since October.
US coal-fired power generation totals 78.7 TWh in December, highest in five months: EIA
US coal-fired power generation totaled 78.7 TWh in December, up 28.3% from November and the highest level of generation in five months, US Energy Information Administration data said late Feb. 25.
Register Now Year on year, monthly generation rose 8.4%, and from the five-year average of about 97.5 TWh in December, generation was at a 19.3% deficit this year. Coal generated a monthly average of 64.5 TWh in 2020, compared with 80.4 TWh in 2019. Out of total power generation, coal took a 22.9% share, the highest in five months. Throughout the year, coal share averaged 19.1%, compared with 23.3% in the previous year. Coal capacity averaged 48.6% in December, up from 39% in the previous month and the largest percentage since August. Annual coal capacity averaged 40.1% in 2020, compared with 47.4% in 2019.
Natural gas contributed nearly 126 TWh in December, up 15.3% from the previous month and down 4.7% from the year-ago month. The monthly average for gas was 135 TWh, up from 132 TWh in the year before. Gas took a 36.4% share of power generation, up 0.4 percentage points from November. In 2020, gas averaged 40.1% of total US generation, compared with 38.2% in 2019. From the five-year average of 112 TWh for the month of December, gas was up 12.4%.
US coal exports drop 7% YOY in Q4’20; China emerges among top importers
U.S. coal shipments to some of the country’s top importers increased significantly in the fourth quarter of 2020, with China recording a tripledigit uptick amid its escalating trade dispute with Australia.
Total U.S. coal exports during the three-month period fell 7.3% year over year to 17.4 million tonnes from 18.8 Mt, according to an analysis by S&P Global Market Intelligence. Compared to the previous quarter, the U.S. shipped 25.1% more of the commodity from October through December 2020.
Despite the year-on-year slowdown, the quarterly exports figure “slightly” exceeded Moody’s projection for the period, reflecting some recovery in coal pricing in the second half of 2020, Moody’s Investors Service analyst Benjamin Nelson told Market Intelligence. Six of the top 10 U.S. coal terminals by volume had a significant slowdown year over year in shipments during the last quarter of 2020 and five posted decreases of 15% or more. Coal terminals in Los Angeles and Detroit booked the biggest year-on-year decreases in seaborne shipments in the fourth quarter of 2020. Los Angeles terminals shipped 135,000 tonnes of coal, dropping 64.1% from the prior-year period, while Detroit terminals recorded a 37.9% decrease in shipments to 90,000 tonnes. Shipments from terminals in New Orleans and Seattle decreased by 35.6% and 32.7%, respectively, year on year, while coal shipments from terminals in Norfolk, Va., fell 15.1% to 6.0 Mt.
Indonesia is removing royalty payments for coal used in its downstream sector in a bid to boost its coal processing industries, a government regulation reviewed by Reuters showed.
The world's top exporter of thermal coal aims to develop its coal processing industry to replace energy imports, such as refining coal to gas to reduce its liquefied petroleum gas imports, while optimising the use of its domestic coal.
Companies usually pay 2% to 7% of calorific value of the coal to the central government in royalties, depending on the calorific value of the coal and if it has been mined from underground or open pit mines.The regulation took effect on Feb. 2.
The energy ministry will issue a further regulation clarifying which coal processing activities are eligible to pay 0% royalties, the document showed, without giving a timeline.
Indonesia's mining giants race to adapt as investors cool on coal
Indonesia's mining giants are piling into coal gasification projects as the country's biggest export markets and global investors move toward a carbon-neutral future.
Coal gasification can be used to create a range of fuel products with lower emissions, an important consideration for investors increasingly concerned about environmental, social and corporate governance, or ESG, issues. The moves also dovetail with the Indonesian government's push to develop the downstream industry, rather than simply exporting raw natural resources. The Southeast Asian country is the world's largest coal exporter, shipping out 455 million tons, or 31.7% of the world's exports, in 2019, according to International Energy Agency. State-owned Tambang Batubara Bukit Asam, known as PTBA, announced in December its partnership with state oil and gas company Pertamina and U.S. chemical industry company Air Products on a $2.1 billion project to con-
vert coal into dimethyl ether (DME). PTBA is planning to start construction of the coal-to-DME processing facility near its mine in TanjungEnim, South Sumatra Province, in the middle of this year. "Moreover with this project, hopefully it can be a good start to support national energy security," Arifin said. "Hopefully our coal-to-DME project will inspire other coal companies in Indonesia to take similar action."
Commercial operations are targeted to start in 2025, with a production capacity of 1.4 million tons of DME per year. Six million tons of coal will feed the plant every year -- about a fifth of the miner's production output in 2019.
China’s Coal Supply Crisis Means High Prices, Blackouts
As the cost of coal spikes during China’s severely cold winter, what is an economic and uncomfortable hardship for many citizens could turn into a hot political problem for one man: President Xi Jinping.
China’s coal prices rose just as temperatures dropped in December, when demand was already surging because of China’s economic recovery from the coronavirus pandemic. Fossil fuels, mostly coal, provide nearly 70% of China’s power.
Power cuts and outages began hitting swathes of China in early December, dimming even firsttier cities such as Beijing and Shanghai. Hunan, Jiangxi and other industry-driven provinces imposed mandatory "power-saving initiatives" for the "orderly use of electricity.” In Zhejiang province, an economic powerhouse, the city of Yiwu’s "power restriction orders” meant local enterprises had electricity for one of every five days.
Given that China is the world’s largest importer of coal, the result is insufficient coal stocks, a flickering power supply and blow to Xi’s prestige, even though Zhao Chenxin, secretary general of the National Development and Reform Commission, which steers energy policy, told citizens in December, “In general, please believe that our ability to ensure stable energy supply is not a problem.”
Low-vol PCI price falls; 5 Australian coal cargoes unloaded
The seaborne low-volatility pulverized coal injection (PCI) cfr price declined on Friday February 19 on alleviated Russian-origin material supply tightness while the majority of Australian coal cargoes were still in anchorage, sources said.
No transactions were heard on Friday February 19, sources told Fastmarkets.
“Russia-origin low-vol PCI supply is not as tight as it was before the Lunar New Year public holiday and its offer price is now around $145 per tonne cfr China,” a trader source said.
Last December, the supply of Russian low-vol PCI was tight due to rail-freight capacity issues in the Russian Far East.
Another trader source estimated that the tradable price for Russian low-vol PCI is at $135 per tonne cfr China now.A trader source from northern China said that five cargoes of Australian coal, which had been waiting in anchorage, were unloaded recently.
“But it’s uncertain whether those cargoes will be allowed to pass customs clearance,” he said.
Some cargoes of Australian coking coal, which had been in anchorage since China’s unofficial ban on Australian coal last October, were resold to other countries at a discount, while the majority of cargoes are still in anchorage along Chinese ports.
Aurizon anticipates coal export growth German coal-fired output back under pressure
Aurizon Holdings is confident of the long-term demand for Australian coal from international markets despite a 10 per cent drop in exports during the second half of last year.
Australia exported 183 million tonnes of coal during the period, comprising 86 million tonnes of metallurgical coal and 97 million tonnes of thermal coal, down 6 and 12 per cent, respectively, on the prior year. Aurizon also experienced interruptions to its export contracts with Australian coal miners due to COVID-19-related disruptions to steelmaking, particularly in China.
The company was unable to retain its 3.2 million tonne a year export contract with Stanwell Corporation, which ended in December 2020, and is also saying goodbye to a 5.2 million tonne per annum contact for New Acland this December. This caused Aurizon’s coal revenue to drop by 8 per cent, or $73.2 million, to $644.5 million.
Aurizon managing director and chief executive Andrew Harding reiterated that the company remained confident for long-term demand for Australia’s high-quality coal.
India was Australia’s largest metallurgical coal export market during the second half of last year, with an export volume of 27 million tonnes, followed by Japan at 16 million tonnes and China at 12 million tonnes. Japan topped Australia’s thermal coal export market with an export volume of 37 million tonnes during the same period, with South Korea coming in second at 16 million tonnes and Taiwan at 10 million tonnes. Generation from German coal-fired plants has remained firm this month, supported by higher demand and below-average wind. But forecasts for milder weather combined with high CO2 prices have pushed more coal out of the forward market for March.
Generation from German coal-fired plants has averaged 6.69GW this month so far, which is similar to January, and the highest February level since 2019. Coal-fired output reached its highest on 11 February at 9.82GW. Despite firm output month on month, generating margins for less efficient coal-fired plants have been narrower this month, compared with January. Working day-ahead clean dark spreads for 36pc efficiency have averaged €0.35/MWh in February compared with €1.44/MWh in January.
German wind power generation has been higher this month at an average of 16.49GW, up from 15.55GW last month but still below the 17.84GW five-year average for February. This combined with below-zero temperatures — particularly during the second week of February — and consequent higher demand have helped to keep coal almost unchanged on the month. Consumption has averaged 60.85GW so far in February and is on track to end it at the highest level for any month since February 2019. Demand for German power exports has continued to decline, limiting domestic coal burn, with net flows at around 8GW, lower on the month and the lowest for the period since 2017. Germany has been an importer from the Netherlands, Belgium and the Czech Republic, net dayahead flows show.
