If China thought it could depress the price of Australian coal by banning it, they must surely be
unpleasantly suprised.
As Chinese domestic prices are back on the boil, the Newcastle forward curve has leaped ahead, with prices for 3-month delivery at over $120.
South African coal is back to being the poorer cousin, as the FOB spread widens once more. Colombia’s Cerrejon has declared force majeure as workers continue to blockade both the mine and rail line, contributing to tightness in the Atlantic market.
Meanwhile, the Russian government is funding more than $10-bn of railroad upgrades to boost exports of coal. As most coal exporting nations don’t seem to be backing down on production now, there will surely emerge a supply glut in the medium term, especially as Pakistan joins India in earnest to (once again) try and encourage domestic coal production to replace imports. Only time will tell if they can get it right.
For now though, the wider energy complex remains bullish, with gas and oil prices looking ready to rally once again this week.
Short term coal tightness appears set to continue as well, with SA exporters also finding the domestic supply chain difficult to move tonnes through.
SA is now back on an adjusted Level 2 lockdown but this should have no effect on coal production.