The return of the pendulum: coal prices start returning to normal
In the period from 25th October to 8th November, spot coal prices on the Baltic Exchange declined by a third – from $210 to $140 a tonne, according to data from Refinitiv.

Similar corrections occurred on the two largest Asian hubs – in the Australian city of Newcastle and in the Chinese port of Qinhuangdao –  where in the same period, prices fell by a little more than 20 % (from $157 and $208 per tonne).

    But even after these corrections, the current price level could hardly be considered low – a year ago at the beginning of November 2020, a tonne of coal on the Baltic Exchange stood at $47 and in Newcastle and Qinhuangdao $56 and $98 respectively.

     In Europe, the background for the price correction was the fall in the price of gas. According to Bloomberg data, from 25th October to 8th November, gas prices at the key TTF European hub dipped from $30 to $26.70 per British thermal unit (BTU). And that naturally affected trade in coal – the second most prevalent type of fossil fuel for power generation in the European Union ( with a share of 14 % compared to 18 % for natural gas, according to data from Ember for the first seven months of 2021).

    In China, where coal’s share in electricity production is 63 %, the price correction is linked to a great extent to higher production – at the end of September, daily production stood at 1.2 million tonnes of coal, while in the period from 1st to 5th November it was 11.66 million tonnes, the Chinese State Committee for Development and Reform reported.

   In October, Chinese coal imports soared 96.2 % in year-on-year terms (to 26.8 million tonnes), according to data from China’s Customs Directorate. As a result, instead of 18 provinces experiencing serious coal shortages at the beginning of October, there were now two at the mid point of the month, according to the calculations of the Commonwealth Bank of Australia.

    The price correction in Europe and China inevitably had an effect on trade at the Australian Newcastle exchange – the key Pacific region coal trading hub. Whereas Europe as a rule serves as a price minimum for coal suppliers, China serves as a price maximum, with Newcastle somewhere in the middle.

    In 2020, the average coal price on the Baltic exchange stood at $36 a tonne, in Qinhuangdao, that price stood at $89 and in Newcastle the price was $57, according to Refinitiv figures. A similar picture applies now, with the price of coal in Australia ($157 a tonne) higher than on the Baltic exchange ($140 a tonne), but lower than in China ($208 a tonne).


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November 2021