Jakarta, CNBC Indonesia – Coal prices have fallen by more than 10% this week. The price of the black stone is unable to return to the psychological level of US$200 per ton despite strong positive sentiment from China.
On Friday trading (14/4/2023), the coal price for the May contract on the ICE Newcastle market closed at US$ 181 per ton. The price fell 4.86% on a daily basis. Meanwhile, within a week, coal prices fell 10.95%.
Coal prices fell even amidst strong positive news from China. Increasing market fears about the global recession and weakening crude oil and gas prices have pushed coal prices down.
China’s coal imports in March 2023 were recorded at 41.17 million tons. This number is the highest since January 2020 or more than two years.
Imports shot up 151% compared to March 2022.
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eskcavator and coal |
Throughout January-March 2023, China’s coal imports have doubled to 101.8 million tons. The opening of the door for imports from Australia is one of the reasons for the surge in imports.
China has also accelerated coal purchases from Indonesia in anticipation of the Idul Fitri holiday. Coal production in Indonesia is expected to decline in April due to the long Eid holiday.
Coal demand is expected to continue to be strong in the second quarter of 2023 in line with the easing of the Covid-19 policy. Increased demand for electricity during the summer season as well as lower production of hydroelectric power plants are expected to increase demand for coal.
Rivers in a number of Chinese regions have been reported to be drying up because summer has come to China. Even though China has injected positive sentiment into the global coal market, the price of black sand has remained plummeting.
The magnitude of market concern about the condition of the global economy and the slump in other energy prices dragged coal prices down from the psychological level of US$ 200 per ton.
Concerns about recession were conveyed by the International Monetary Fund (IMF) and the United States (US) central bank, The Federal Reserve (The Fed). IMF in the April 2023 edition of the World Economic Outlook A Rocky Recovery cut global growth to 2.8% in 2023, from 2.9% in the previous projection.
The IMF warned that the banking crises in the US and Europe and the high global inflation will put pressure on the world economy, especially in developed countries. One country that will face a contraction in growth is the engine of the European economy Germany.
In the minutes of the Federal Open Market Committee (FOMC) meeting that came out yesterday, the Fed also said the US economy could enter a recession following their banking crisis. For the record, three US banks collapsed last month namely Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank.
The threat of a recession certainly worries commodity market players. An economic slowdown or recession will make demand for commodities decrease so prices fall.
European natural gas prices EU Dutch TTF (EUR) fell 1.84% a day to 42.09 euros per mega-watt hour (MWh) yesterday. Meanwhile, the price of WTI and Brent crude oil fell by around 1% this morning.
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