World coal prices have increased for many months now, but actually increased sharply from May 2021 due to insufficient supply to meet demand, in the context of hot weather in China pushing up electricity demand, and The rapid increase in steel prices causes the demand for steel production materials to increase accordingly.
Coal has become the “silent winner” among energy commodities. While not attracting as much attention as crude oil or liquefied natural gas, which are more premium commodities, coal has benefited from strong demand growth.
The prices of thermal coal (used for thermal power plants) and coking coal (used for steel production) have increased sharply in recent months, mainly due to China, a major importer and consumer of fuel. world, with demand increasing sharply as the economy recovers from the Covid-19 pandemic and the policy of restricting Australian coal imports.
The price of coking coal for September term on the Dalian bourse on July 20 once increased 3.2% to 2,098 yuan (US$323.54) per ton, the highest since May 13. In 2021, the session ended up 2% compared to the previous session’s close, reaching 2,074 yuan/ton. Similarly, the price of coke (coke) also increased by 2.6% to 2,738 yuan/ton.
“Capacity utilization rates by coking companies are increasing, but have not recovered to pre-government levels, and are also lower than in the same period in previous years.” information from SinoSteel Futures said.
Accordingly, China’s coke production in June 2021 decreased by 3.2% from a year earlier, to 38.91 million tons.
Consumption of thermal coal soars
A heat wave is happening across China’s largest industrial producing provinces, pushing electricity consumption in these localities to an all-time high, the main reason for the rise in coal prices. strong recently. Electricity consumption in China in June 2021 was nearly 10% higher than in the same period last year, and continued to increase in July.
The State Grid reported that for the first time, electricity load in Zhejiang province, near Shanghai, surpassed 100 million kilowatt-hours. Record high electricity loads also occurred in nearby Jiangsu and the southern region of Guangdong, where temperatures have reached 37 degrees Celsius.
The soaring demand for coal has pushed the price of thermal coal futures in China in a short time to skyrocket to a two-month record high of 900 yuan a tonne, up 30 percent. % compared to the beginning of this year.
Australian thermal coal prices in July 2021 rose to their highest level in more than a decade, at $115.35 per tonne, higher than $100.33 per tonne in June 2021 and the highest since reaching $117.6/ton in May 2011, according to Refinitiv data.
Worryingly, the hot weather will continue.
Analyst Wang Haitao of Huatai Futures Co. “Southern China is very hot and daily electricity load is constantly breaking records to set new highs. Although coal supply has increased, coal supply cannot continue to increase forever. Some areas have increased power,” said The region is restricting electricity use and issuing warnings about the use of coal.”
Pressure on China’s power sources is mounting as summer begins – a summer that meteorologists say could be hotter than usual.
Combined with the weather factor is the strong growth of China’s economy after the Covid-19 pandemic, when factories resume operation after the pandemic, the demand for electricity will therefore increase.
High demand for metallurgical coal
The trend of metallurgical coal prices (coking coal) increased starting from the middle of the second quarter of 2021 and is expected to continue in the last months of this year, when the global supply-demand balance tightens.
The price of Australian coking coal FOB in the second quarter of 2021 increased by 72% compared to the first quarter of 2021 to $194/ton, while the price for delivery to China (CFR) during the same period increased by 43%, reaching the session 30/6 reached 309 USD/ton.
Demand for Australian coking coal in the second quarter of this year increased strongly not by China, but by other customers, amid tight supply.
According to Platts, Australia’s coking coal trading volume (spot contract, FOB) in the first 6 months of 2021 has increased sharply, 279%, compared to the same period last year, especially in the period from the end of the quarter. I to the beginning of the second quarter.
As of the end of June 2021, Europe accounted for 18% of total Australian export spot coal volume, including many types such as: high-grade coking coal, hard coking coal (HCC), coal pulverized (PCI)…It is known that Europe increased imports of Australian coal for two reasons: (1) Australian coal price is cheaper than US coal, and (2) disagreement between Australia and China caused Australia to switch to markets other than China.
However, Australia’s spot coal supply has not caught up with demand since the end of the second quarter of this year. According to S&P Global Platts data, there were only 13 contracts traded in Australia’s premium HCC coal in the first half of July 2021, compared with 43 contracts traded in June 2020 and 26 contracts in July 2020. Famous Australian hard coal brands such as Peak Downs and Goonyella are all short of supply, pushing up asking prices.