Thermal Coal

December 9, 2020

The Research Team reviews the Thermal Coal market

 

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9 December 2020 

  • After weeks of increasing thermal coal mining capacity utilization in the Atlantic basin, this week we have witnessed a considerable decline. Furthermore, the recent trend of increasing supply in the Pacific basin has continued to increase this week. Our global coal inventory index indicator has demonstrated some volatility recently. However, the overall direction of the trend is towards decline indicating tightness in inventory levels.
  • The EU climate spreads continues to tighten further as demonstrated in the chart of the week. With improving profitability, this would mean that the incentive for coal burn will continue to be supported. Not only are we seeing signals supporting demand for the EU, but also in India and Korea as well. Our data for China is less convinced – see discussion in the attached report.
  • In our previous coal note, we predicted weak credit conditions for the rest of Q4. This has held true and we have continued to see decline which had a negative impact on the price of coal in November. This week we have also seen a decline to EU energy intensity forecast to develop in week 51, despite the recent week-on-week increases we have seen. However, we have seen some improvement to our proprietary Currency Impact Index. Although we continue to see negative values, the trend in recent weeks has been one of support for the upward move of the coal price. In our view this is down to higher purchasing power of key importers.

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