Prices of Newcastle 6,000kcal/kg coal have corrected following falling European gas and coal prices, and more supply from Australia could help mitigate shortages in 2023, says Fitch Ratings.
A recent sharp fall in gas and coal prices in Europe, as a result of ample non-Russian supplies and warm weather, has caused Newcastle 6,000kcal/kg coal prices to correct to USD320/tonne from around USD450/tonne in early September. Newcastle outperformed ARA prices in Europe that have nearly halved since September, mainly due to Australia’s wet weather and supply restrictions. We expect weakness in the Newcastle 6,000kcal price in 2023, especially after the Australian tropical cyclone season from November to April, given its premium over low-grade thermal coal and coking coal prices.
China’s benchmark Qinhuangdao 5,500kcal/kg price climbed unexpectedly from around CNY1,300/tonne to CNY1,600/tonne during September-October before mildly correcting to CNY1,550/tonne in an overall balanced market. China’s coal production increased 10.0% yoy in 10M22, outpacing coal-fired power generation, which grew 0.8% yoy. Drought and reduced hydropower production, the impact of Covid-19 on supply, and stricter mining safety inspections have taken turns to stimulate market sentiment. Restocking demand ahead of winter is providing support to prices when consumption is at a seasonally lower level.
India’s thermal coal imports rose 36% during January-August 2022, boosted by growth in power demand. The country’s economic recovery has continued to power demand growth, with thermal power generation rising by about 7% yoy during the same period. Domestic coal supply has been improving gradually, rising 14% yoy in January-August 2022. We expect imports to remain robust, supported by continuing demand growth and partly offset by a gradual increase in domestic coal supply and renewable capacity additions.
Source: Fitch Ratings