Thermal Coal

September 6, 2019

The Research Team reviews the Thermal Coal market

 

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6 September 2019

  • We are now bearish on short-term supply conditions. Supply has increased across both basins and should add further downward pressure alongside weak demand conditions. Our Implied EU Days of Consumption (DoC) has continued to increase which reflects weak S&D conditions overall. Global inventory levels have risen and our expectations point towards a further increase in weeks 37-38.
  • Short term demand conditions are bearish. Our weather models point towards low renewable power generation in week 37. Levels remain under the long-term average. Additionally, we continue to see a further slowdown in overall Chinese coal demand, as well as in North-East Asia. The weakness can also be seen in the shrinking import arb. for key importing countries in Asia.
  • Our short-term macroeconomic view remains bullish. Our proprietary currency model has strengthened and is at one of its highest levels in recent weeks. While short-term credit conditions remain tight, we expect a gradual improvement from week 38 onwards. The latest manufacturing data continues to reflect a further rebound in downstream manufacturing demand which is a good proxy for short-medium term coal demand. However, energy intensity in the EU looks to slowdown in the short-term.

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