Thermal Coal Market

September 7, 2017

The Research Team gives its view on the thermal coal market


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5 September 2017

  • Our assessment of the short-term supply conditions is marginally bearish. Both Atlantic and Pacific basins continue to see supply increases which would put headwinds on prices. The spread in the supply chain capacity utilization between Atlantic and Pacific contracted further, which historically has been an API2 price positive development. We also picked up signs buildup in inventory levels (chart below) across key coal consuming regions. This is likely to put downward pressure on coal prices.
  • Short term demand is bearish. The import arbitrage into the Chinese market continues to be open which is overall supportive for seaborne coal demand. Indian import arb remains negative and have deepened, this would likely deter imports. Our forecast for the Fossil fuel power generation capacity utilization during week #34-35 shows a drop in share of fossil fuel in overall power generation, this is likely to reduce demand for coal.
  • Macroeconomic conditions are bullish. The currency impact index also indicates price positive developments as it indicates higher purchasing power of key coal consuming countries. Our energy intensity indicator reverted  bullish as we picked up improving conditions for consumption of coal. This is supported by our latest update for manufacturing activities which showed that conditions have improved. This is likely to provide support for prices. However, our short term liquidity index reveals further tightening of credit which is a price negative development.