Physical coal markets can’t seem to catch a break. Even as paper prices strengthened slightly across the curve, the discount to physical deepened as lack of buyer activity persisted. The Rand is also stubbornly strengthening as a wave of “risk on” sentiment permeates global markets and the energy complex.
Natural gas and emissions prices saw some impressive gains, with natgas seeking to escape its weakest price in a long time. Chinese domestic prices remain firm, towards the top end of government’s preferred range, although this lends little to no support to Newcastle or SA coal prices, with Chinese utilities buying local instead.
Japan is considering scrapping some older coal-fired units to reduce CO2 emissions, and will need to bring some of its nuclear fleet back online to ensure baseload supply. In bullish news, Coal India has suffered a significant production hit during a recent 3-day strike by workers against government’s move to privatise the coal sector.
The drop in export netback prices is compressing inland SA coal margins but there is still some activity in routing coal to buyers with an Eskom CSA, helping to support lower grade pricing.
Almost the only game in town now is trying to sell to Eskom and to supply the industrial sized market, although prices for A and B grade peas and nuts are also near historic lows.