October 4, 2020 - Last week, thermal coal indices in Europe continued their rally, exceeding 53 USD/t. Stronger fundamentals stem from rising gas indices 11.369 EUR/MWh (+0.822 EUR/MWh or +7.2% to September 16, 2020) on fears of a possible freeze of Nord Stream-2 project by Germany, limited coal supplies from Colombia due to the ongoing strike of Cerrejon workers and high daily temperatures in Germany, boosting generation at local coal-fired power plants. Abundant coal reserves at ARA terminals 6.94 mio t (unchanged to September 16, 2020) limit further growth of prices.

Heightened bidding activity of Indian cement companies, imports of South African material by Pakistan and a reduction in the supply of Australian coal in the export market supported indices of coal from SA. However, Indian state-owned mining company Coal India (CIL) in the coming days plans to launch an electronic auction for the sale of 15-20 mio t of material to local buyers. The auction is a part of the Indian mining industry strategy to reduce coal imports. Coal reserves at the Richards Bay port terminals are 4.4 mio t (unchanged to September 16, 2020).

Suspension of a number of Glencore mines in Hunter Valley field (Australia), continued growth of coal prices in Chinese market, as well as a number of deals for the purchase of Australian coal by Chinese energy holdings strengthened prices of Australian material. However, the lack of clarity regarding the allocation of additional import quotas increases risks for Chinese consumers and withholds indices.

The activity of Chinese buyers willing to buy Indonesian coal in the run-up to public holidays on October 01-08 had a positive impact on Indonesian coal quotes.

Rebound in Chinese industrial production, spurring steel consumption, limited output of coking coal in the Chinese market due to inspections of National Commission for safety in coal mines, as well as concerns about La Nina typhoon, approaching Chinese coast, strengthened demand for Australian metallurgical coal, shoring up prices. However, tensions in Sino-Australian relations and the lack of clarity over the allocation of additional quotas for coal imports maintain pressure on the quotes.