Brisbane December 9 2021: Bullish demand for seaborne thermal coal will keep prices buoyant in early-2022, according to a commodity outlook report by Australia and New Zealand Banking Group.
“Limited global supply and strong Asian demand should support coal prices in 2022,” the report said. “As the world recovers from recession, demand is expected to strengthen, particularly in countries where coal is still a significant source of power.”
However, in the longer run, ANZ expects lower thermal coal demand on the back of robust investments in the energy efficiency space. “We ultimately expect increasing investments in energy efficiency and coal-to-gas switching to lead to lower thermal coal demand. While some of this may be offset by the increasing electrification of the industry, the transition will ultimately be a headwind for prices.”
Weather disruptions and the second wave of the coronavirus impacted production in Indonesia while bullish demand from consumers like China pushed prices to record-highs this year due to a supply-demand mismatch, according to market participants.
The price of Indonesian 4,200 kcal/kg GAR coal touched a historical high of $158/mt FOB on Oct. 19 from $44.40/mt FOB on Jan. 4, a jump of 255.86%, data from S&P Global Platts showed. Import prices of thermal coal softened after China’s top planning body, the National Development and Reform Commission, announced measures to tame domestic prices that had also hovered north due to supply tightness.
Prices of Qinhuangdao 5,500 kcal/kg NAR hovered over Yuan 1,500/mt FOB ($236.05/mt) levels around Oct. 28, according to sources.
Prices are now within Yuan 1,200/mt ($188.84/mt) FOB levels.
The ANZ report said coal shortages in China have recently eased as local authorities lifted restrictions on production and allowed for the hiking of power prices, thus incentivizing coal-powered generation.
India’s coal shortage is likely to persist due to low stockpiles, the report said.
India’s power sector witnessed an acute coal shortage earlier this year, with stockpiles dwindling to only four days’ worth coal burn on an average across power plants, according to data from the Central Electricity Authority.
The stockpiles at power plants were at 21.11 million mt on Dec. 6, sufficient for 10 days of coal burn at a daily consumption rate of 2.078 million mt, according to data from CEA.
The stockpiles were at 19.5 million mt on Nov. 28, sufficient for nine days’ coal burn.
Insufficient power generation from renewable sources have led to greater reliance on coal-fired power generation, the report added.
