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Seaborne coal market to be undersupplied in 2022: Noble

Seaborne thermal coal demand is expected to hold steady this year, supported by increased demand from India and Europe, with the market expected to be undersupplied, according to commodity trader Noble Resources. Noble projects this year's global thermal coal demand at 996mn t, against a supply of 983mn t. This scenario could further support international coal prices, which are hovering at multiyear highs. Several European countries including Germany, the UK, and France are bringing mothballed coal-fired units back on line. India is expected to import 171mn t of thermal coal this year, up from 149mn t a year earlier. Imported thermal coal demand from the Atlantic region, including European countries, appears to be strong. Thermal coal imports by the Atlantic region — including purchases by European as well as north and south American countries — are expected to end the year at 180mn t, up by 39mn t from last year. Demand from north and southeast Asian countries is also strong this year, with Japan and South Korea expected to raise imports. Rising imports in other markets would partly offset the expected decline in receipts of seaborne coal by China, although demand from Chinese buyers has recovered sharply in the last three weeks.

China to host almost a third of the world’s new coal mines

Almost a third of the new coal mines planned for the world are in China, all but guaranteeing that output will keep rising in the top producer, even as calls grow for the dirtiest fossil fuel to be phased out to avoid the worst effects of climate change.

Based on data from Global Energy Monitor, China had 559 million tons of proposed new coal mines at the start of the year, accounting for 29% of the global total, according to a note from Bloomberg Intelligence. Australia was second with a 17% share, then India and Russia with 16% each.

Still, the 1.94 billion tons of new mines planned around the world is 15% less than a year ago. The daily coal output target was raised to 12.5 million tons in August, implying annualized production of 4.56 billion tons, BI said. While the spot price should remain resilient as miners prioritize shipments to term-contract customers, imports are likely to come under even more pressure.

China digs deep to raise coal output to record high

China’s coal production has surged this year as the government seeks to improve energy security by reducing dependence on imports and amassing inventories at power plants. Raising domestic coal output is consistent with Beijing’s broader effort to indigenise supplies of critical energy sources, raw materials and technology.

Production hit a record 2,929 million tonnes in the first eight months of 2022, according to China’s National Bureau of Statistics. Mine output was up by 332 million tonnes (13%) compared with the same period in 2021 and 520 million tonnes (22%) compared with the last pre-pandemic year in 2019.

Production has been growing faster than coalfired electricity generation as the government tries to increase fuel stocks and cut reliance on imports.

Thermal power generation, nearly all from coal, set a new record of 3,883 billion kilowatt-hours (kWh) in the first eight months of the year. But thermal generation was up by just 10 billion kWh (0.3%) compared with 2021 and 497 billion kWh (15%) compared with 2019.

Indonesia deepens renewables push

Indonesia's move to gradually reduce dependence on coal and promote renewable energy will serve as a model for other countries wanting to pursue climate-friendly growth, analysts said.

Indonesian President JokoWidodo issued a decree on Sept 14 instructing government agencies to prepare a road map for renewable energy development and the gradual phasing out of coal-fired power plants.

The Presidential Regulation No 112 of 2022 on the Acceleration of Renewable Energy Development for Electricity Generation, or PR 112/2022, is in line with Indonesia's commitment to hit net zero emissions by 2060. It comes as Indonesia holds the presidency of G20, and Indonesia has listed sustainable energy transition among its priorities as this year's G20 head.

Putra Adhiguna, energy analyst at think tank Institute for Energy Economics and Financial Analysis, said that by issuing PR 112/2022, Indonesia sets an example that it is committed to developing renewable energy and phasing out coal-fired plants, even though it is highly dependent on coal for its energy needs and export revenues.

Coal miners face financing squeeze as more banks pledge to ‘go green’

Coal power and mining firms in Indonesia are finding it tougher to raise funds due to climatecrisis concerns and are being increasingly pushed by banks to present concrete-transition plans to shift away from dirty energy.

Standard Chartered bank announced it was ending its partnership with PT Adaro Indonesia, a subsidiary of coal miner PT Adaro Energy, as the British financial giant pledged to stop

providing financial services to mining and powergeneration companies deriving 100 percent of their revenue from thermal coal.

National banks are also facing foreign and domestic pressure to stop funding coal business as the Indonesian Financial Services Authority (OJK) demands lenders which belong to the BUKU 4 category -- or those with core-capital higher than Rp 30 trillion (US$2.675 billion) -- such as state-owned Bank Rakyat Indonesia (BRI) and private lender Bank Central Asia (BCA), to diversify their lending portfolio from fossil fuels to reduce their climate risks.

Revised taxation on coal imports to hike power rates in Indonesia

The revised uniform taxation being enforced by the Bureau of Customs (BoC) on Indonesian coal imports being utilized for power generation will drive up electricity rates, according to industry players.

As noted, the scale of rate increases in the electric bills could range from P0.10 per kilowatt hour (kWh) and up to P1.70 per kWh for bigger scale coal-fired generating facilities – primarily those that are in the 600-megawatt installed capacity range.

According to Frank Thiel, president of the American Chamber of Commerce of the Philippines (AmCham) and managing director of Quezon Power, the new Memorandum Order No. 242-2022 issued by the Assessment and Operations Coordination Group (AOCG) of the Customs Bureau “does not consider the different coal CVs (calorific values), nor does it consider the different indexes used to contract and price coal.” It was emphasized that the reference applied by the BOC in July coal shipments, in particular, had been at the rate of $319 per metric ton (MT). .

Reversing course, Indonesia conditionally allows new coal-

Indonesia is allowing the development of coalfired power plants for certain projects and under specific conditions, a year after it said it would phase them out to become carbon neutral by 2060.

A presidential regulation allows construction of coal-fired steam power plants “within an industrial area oriented toward boosting the value of natural resources,” or designated as nationally strategic projects that create many jobs and contribute to economic growth.

Companies also are allowed to build coal-fired power plants provided that they commit to reducing greenhouse gas emissions by at least 35 percent within 10 years since the start of operations and/or cease operations by 2050. To realize the energy transition, the government begins by transitioning from conventional vehicles to electric vehicles, the government has said.

Australia's Queensland coal exports mixed in August

Coal shipments from the Australian port of Dalrymple Bay Coal Terminal (DBCT) in Queensland rebounded in August from a fiveyear low in July, but fell at the ports of Gladstone and Hay Point.

The ports of Hay Point, DBCT, Abbot Point and Gladstone shipped 16.17mn t of coal in August, up from 15.26mn t in July, but down from 17.2mn t in August last year, according to port data. The ports shipped 125.77mn t of coal in January-August, down from 133.72mn t a year earlier, putting them on track to dispatch less coal this year than the 197.29mn t shipped last year and the peak of 219.24mn t in 2019.

DBCT and Gladstone, which are multiuser ports, have experienced the biggest decline in shipping year to date, while Australian mining firm BHP has only seen a 1pc drop through its Hay Point port and Indian firm Adani just 0.64pc through its Abbot Point port. Abbot

Point is used to export coal from Adani's 10mn t/yr Carmichael mine, which began shipping in January and should significantly boost throughput at the port.

AGL Energy to accelerate exit from coal

Australia's largest electricity generator AGL Energy will go "net zero" after abandoning plans to split into two companies.

Australia's biggest carbon emitter announced a shutdown of all coal-fired generation by the end of fiscal year 2035, with annual greenhouse gas emissions to reduce from 40 million tonnes to net zero.

AGL chair Patricia McKenzie said the company will have "net zero" emissions from operations following the closure of the Liddell and Bayswater power plants in NSW and the Loy Yang power station that provides almost a third of Victoria's power. The financial implications of bringing forward the closure of Loy Yang by a decade includes an impairment charge of $700 million. AGL plans to invest up to $20 billion by 2036 in new renewable and energy storage funded by assets on the balance sheet, offtake agreements and partnerships.

Climate change could be doubleedged sword for Australian coal

Australia is raking in huge amounts of cash from coal—due both to bad geopolitics and bad weather. The war in Ukraine is a key factor boosting benchmark Asian coal prices, which recently hit a new high. But some very unusual weather is also shutting mines and transport links down under.

In the short term Australia, one of the world’s two top coal exporters, and coal miners like Glencorewill benefit from even more pricing power. persistently high prices—or very high price volatility—risk driving away customers over the long run, particularly when affordable substitutes are available. If more frequent extreme weather events, a key prediction of many climatologists, become more routine it may mean more price volatility for mined commodities like coal too.

‘Anthracite prospects in South Africa looking very good’

The prospects for anthracite are looking very good, especially in terms of market value and having demand coming from different parts of the world. many European countries are seeking alternatives to anthracite from Russia, a major anthracite producer, and opportunities are opening up for non-Russian anthracite producers to establish long-term relationships with new markets.

South Africa produces approximately threemillion tons of anthracite per annum. About 60% is exported via Richards Bay or Durban, the balance is consumed locally. More than 90% of exports consist of fines. Billions in export earnings revenue are generated by the country through the sector and thousands of people are directly and indirectly employed in this sector. About 80% of the Zululand Anthracite Colliery’s (ZAC’s) product is sold in South Africa as a cheaper option for manufacturers compared with higher-cost Russian anthracite or coke from China. With its variety of industrial applications, anthracite is key to many of South Africa’s downstream industries.

Four inter-connected factors will drive the market in the foreseeable future. The first is the race for post-Covid global economic recovery. The second is the ongoing Russian war in Ukraine which has triggered Western sanctions against Russia. European anthracite importers that have previously depended on Russia have searched and discovered replacements elsewhere including in South Africa. The third factor is the intrinsic value of anthracite. As a high-premium coal with high carbon content, anthracite is suitable for a variety of industrial applications – from steel to electrode paste

manufacturing. The fourth is possible shortage of coking coal.

.Tanzania coal exports exponentially soar as Europe flocks to Africa for natural resources

In the last few months, Tanzania’s coal entered the European market, thanks to a contract between Ruvuma Coal Ltd. and Hong Kongbased Kenexon Co. Through the one-year contract, the companies in May transported 60,000mt of coal to the Netherlands. Tanzania's coal reserves are estimated at 1.9 billion tonnes, 25% of which are proven.

Coalfields with the highest potential are Ketawaka-Mchuchuma in the Ruhuhu Basin, the Ngaka fields in the South-West of Tanzania, and the SongweKiwira fields.

Buyers in Europe and beyond are now vying to pay top dollar for coal from often remote mines in places such as Tanzania, Botswana and even potentially Madagascar.The resurgent coal demand, driven by governments trying to wean themselves off Russian energy while keeping a lid on power prices, clashes with climate plans

EU considers measures against export of Russian coal to third countries under new sanctions

The European Union is working to curb the export of Russian coal to third countries as part of the new round of sanctions to respond to the Russian escalation in the Ukrainian conflict following the announcement of partial mobilization of the population, nuclear threats and referendums in the Donetsk, Lugansk, Kherson and Zaporiyia regions.

In an appearance in the European Parliament, the deputy managing director for Eastern Europe and Central Asia of the EU External Action Service (EEAS), Luc Pierre Devigne, has pointed out that the new European sanctions will include further bans on Russian imports and exports to the country, as well as targeting new economic sectors and expanding the 'blacklist' of individuals and companies responsible for the Russian escalation.

He also pointed out that EU diplomacy is working with the European Commission to curb the export of Russian coal to third countries, following the measure that prohibits European companies from participating in these transactions.

European industry faces growth pangs amid soaring energy prices

Europe is paying seven times as much for gas as the US, underscoring a dramatic erosion of the continent's industrial competitiveness that threatens to cause lasting damage to its economy. With Russian President Vladimir Putin redoubling his war efforts in Ukraine, there's little sign that gas flows - and substantially lower prices - would be restored to Europe in the near term.

Signs of an economic transformation are already afoot: Germany, Europe's biggest economy, has seen its usual trade surplus dwindle as the surge in imported energy costs offsets its high-value exports of cars and machinery, and chemical companies began shifting production outside the country. Last month, German producer prices jumped by a record 46%.

Plastics maker Covestro AG won't make growth investments in Europe if the crisis persists and instead look to Asia, where chief executive officer Markus Steilemann said the company can secure energy at prices 20 times cheaper than in the German and European spot market. Volkswagen, Europe's biggest carmaker, warned that it could reallocate production out of Germany and Eastern Europe if energy prices don't come down.

Major shift in Russian coal shipment destination since war

In the new geopolitical situation, exports of Russian coal undergo structural transformation. The market participants expect the shipments to shift from Europe to the East with China, India and Turkey to be the key importers. The coal shift to Asia is attributed not only to import restrictions: it is the Asia Pacific Region that accounts for the main growth of the global demand for coal.

In the 8-month period of 2022, India increased imports of Russian coal 2.2 times to 4.37 million tonnes with scope for even more taking into account high quality of Russian coal and considerable discounts versus the offer of suppliers from other countries.

Coal is primarily exported by sea with the shipment ports concentrated mainly in three regions: Far East, South and North-West. In the Far East, stevedores’ facilities do not get sufficient amount of coal. In 2021, throughput capacity of the Eastern Operating Domain was 144 million tonnes with the demand as high as 284 million tonnes per year. Thus, the railway capacity deficit is estimated at 140 million tonnes. While the ports in the East are suffering logistical constraints, ports operating in the South and in the North-West could have exported about 80 million tonnes in 8 months if they were fully loaded. However, they shipped only 62 million tonnes so far.

Colombia mulls becoming world’s top coke exporter

The Colombian coke industry expects to double its exports in the coming years and surpass China and Poland as the world top exporter.

“If we manage to reach 10 million mt/year, we would enter the fight for that first place, in a world in which there is a demand for this product and in which we have a great advantage: our quality,” senior coal official from the country has said. 4.2 million mt of coke in 2021, behind only China and Poland, which have been fighting in recent years for the first place with coke exports of 8-9 million mt/year. Brazil, México and some European countries are the top destinations of Colombian coal, according to the federation.

Cante noted that Colombia has a variety of low-phosphorous metallurgical coal, unique in the nation’s Norte de Santander region and in a specific region of China. Several coking coal miners and metallurgical coke producers unveiled plans to lift production in the coming years while noting the potential risks regarding demand.

Global tightness may offset US met coal output growth

In the first half of 2022, US coking coal output was stable at approximately 28mn st (short tonnes) from the same period a year earlier, data from the Mines Safety and Health Administration (MSHA) shows. . If output continues at the same rate as the first half of the year, 2022 output should exceed 2021 by around 3-5pc. But as miners continue to respond to a strong price environment, it is likely that production at US coking coal mines will continue to accelerate, resulting in a stronger increase.

Despite the likely increase of US coking coal output and recent declines in steel output in most regions, this year's elevated thermal coal prices and the sale of coking-quality coals to thermal end users are likely to significantly diminish the availability of coking coal for metallurgical buyers for the rest of the year. At the same time, the onset of La Nina weather in Australia is likely to limit the country's coal exports, lending support to Asian demand for US coking coals.

It remains to be seen to what extent the expected fall in European blast furnace production in the near future will be matched by a fall in coke output. Coke plants' ability to produce their own gas could incentivise relatively stable coke production for the rest of the year, despite the poor sentiment in steel markets.