Thermal coal prices have been declining as supply increases and concerns of shortage are dissipated. The cost of coal used by power plants is, in some areas, dropping to levels recorded prior to Ukraine’s invasion in February. This invasion triggered a sharp increase as buyers expected to incur losses from both nations.
Last week, the Australian benchmark price of 6,000 kcal/kg of coal at the Newcastle Port indicated a $373.75/ton price. This figure, as evaluated by globalCOAL, is a 6.4% decrease from the price recorded on the market’s close the week before. This grade, which is primarily used by utilities in Japan, has declined by more than 17% from its record-setting $452.75/ton price, which was recorded las month.
The cost of coal from Australia with an energy rating of 5,500 kcal/kg has also been declining, with Argus giving it a $161.10 per ton price level last week. This is slightly above the $155.30/ton price that prevailed prior to Ukraine’s invasion. However, it is a significant drop from its record price of $284.20/ton, which was recorded earlier in the year. Argus is a commodity price reporting agency involved in the energy and commodity industry.
The price of 4,200 kcal/kg coal from Indonesia, which is primarily bought by the two largest importers of coal globally — India and China — has also dropped in price. Last week, Indonesian coal was going for $89.75/ton, which represents a 25% decline from its peak of $120.85 recorded after Moscow invaded Ukraine. However, its current price is still higher than its preinvasion tag of $79.53/ton.
In addition, the steep discounts offered on coal from Russia imposed as a result of the heavy bans have also been dropping. This suggests that producers in Russia may have found new buyers given that traditional clients such as South Korea and Japan reduced their imports. Earlier last week, the price of 6,700 kcal/kg of coal from Russia was $190/ton. This represents an almost 20% gain from the $158.50/ton recorded after the invasion. Despite this improvement, this coal grade hasn’t fully recovered to reach its preinvasion tag of $226.3/ton.
Russia may not record exports to Europe though, because the continent plans to enforce its ban on all coal imports from the Kremlin. It is expected that exporters such as Canada, the United States and Colombia will help meet Europe’s demand. Major exporters in Asia may also help meet the demand in Europe.
At the moment, varied trends are being observed despite the fact that wealthier nations are willing to pay more to secure the fuel, to the benefit of extraction companies such as Warrior Met Coal Inc. (NYSE: HCC).
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