Karachi November 02 2021: Coal for delivery next year in Europe continues to tumble as China boosts production, easing power prices across the continent.
Cement manufacturing is an energy-intensive process. Coal represents one of the largest source of energy for cement production. Therefore any drop in coal prices will directly reduce cost of production for cement manufacturers.
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With China taking measures to boost internal production rather than the previous mantra of securing supplies “at all cost,” prices on the global market are falling. Europe’s benchmark front-year contract has tumbled more than 50% since hitting an intraday peak of $193 per metric ton in early October.
Daily output from China’s coal mines has been above 11.5 million tons since mid-to-late October, about 1.1 million tons higher than the end of the previous month, the top economic planning agency said in a statement.
Prices are falling “with the increased coal production in China continuing to add to the bearish sentiment,” Energi Danmark said in note. “The contract has now fallen more than 30% in a matter of just two weeks on the very bearish signals that have started dominating the market.”
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German power for next year reversed gains earlier on Monday to drop as much as 6.5% to 102 euros per megawatt-hour, the lowest since Sept. 23 on European Energy Exchange AG. The Nordic equivalent slipped 8.6% to 32 euros, the lowest level since July 26 on Nasdaq Commodities.
With European natural gas supplies ahead of the winter still uncertain, falling coal prices will also boost output at power plants across the continent that use the solid fuel. German power generation from stations using hard coal already increased 19% in October, versus the same month last year, according to data from Fraunhofer ISE.
