Weekly Coal Index Report

21st June 2021

Weekly Coal Index Report

The price surge has subsided for now, although Asia Pacific physical cargoes continue to experience strong demand. Australian coal is likely to remain the price leader as deliveries to
the port of Gladstone are being restricted after a train derailment last week.

For its part, South African coal also continues to experience difficulty in accessing Transnet Fright Rail capacity. European power and gas prices are stronger with carbon emissions also looking robust once more.

Chinese domestic thermal coal prices remain strong but stable for now, as market regulators continue their investigation into coal price speculation and illicit hoarding. Suppliers are finding it difficult to maintain supply going into China’s peak summer season, even as Chinese regulators shut more coal mines amid rising concern over industrial accidents. The shutdowns coincide with nationwide celebrations of the 100th anniversary of the founding of the Chinese Communist Party starting in July, following which the pressure will likely ease.

South African export coal is now also benefitting from a weakening rand (as gold prices subside the rand typically weakens) even as free-on-board Richards Bay Coal Terminal prices flatten out in dollar terms.

The bulls have been in the driving seat for some time now. While continuation is always more likely than change, there must always come a point when a market changes direction, even if only for a temporary correction, allowing for pressure to come off (momentum to fall) and thus for a more sustained rise to continue.

With physical premiums still so high, it is hard to see any meaningful sell off here. However, the risk of it happening is surely quite strong now. Although with trend still so bullish, any dip in momentum is likely to be relatively short-lived.