Jakarta, CNBC Indonesia – The price of coal continued to slide and is now moving at the lowest level in the last nine months. In trading on Tuesday (24/1/2023), the February contract stone price on the ICE Newcastle market closed at US$ 284.75 per ton. The price decreased by 1.81% compared to the previous day.
This price is the lowest since April 5, 2022 or more than the last nine months.
The weakening of coal prices yesterday also extended the negative trend of black sand. Coal prices have weakened since last Wednesday (18/1/2023) or in five consecutive trading days.
In that five-day period, coal prices fell 13.7%.
The continued slump in coal prices is due to a number of factors, ranging from falling demand to falling gas prices. Expectations will continue to weaken demand and the price of thermal coal will also drag down the price of coal as a whole.
EU Dutch TTF (EUR) natural gas prices fell 7.73% a day to 58.27 euros per mega-watt hour (MWh) in yesterday’s trade. This price is the lowest since September 2021 or in the last 16 months.
Gas prices continue to decline because supplies from the United States (US) Freeport are expected to return to Europe. This will further ensure adequate gas supply in the Blue Continent.
Coal prices also slumped due to weak demand, especially from China. Most Chinese citizens are still enjoying the long New Year’s or Chinese New Year holidays until January 27, 2023.
Long holidays reduce office and factory activities in China. The demand for electricity and coal will also decline.
China is the biggest consumer and importer of coal in the world so developments in that country will have a major impact on coal demand.
Coal prices also weakened due to expectations of the continued collapse in the price of thermal coal.
The reopening of the China-Australia trade agreement is expected to increase demand for coking coal. On the other hand, the demand for thermal coal will continue to decline.
Australia is the largest exporter of coking or metallurgical coal. Reported from Reuters, the price of Australian coking coal on the Singapore futures market rose 21% since the end of the year to US$ 315.67 per tonne.
In contrast, the price of thermal coal Newcastle fell 13% since late last year to US$ 350.95. Thermal coal is a source of energy for electricity generation while coking coal is mostly used for the steel industry.
From June 2022 until the end of the year, the price of thermal coal is above coking coal due to the rapid demand for power generation.
China’s coking coal imports in December 2022 amounted to 2.33 million tons and the figure is expected to increase to 2.6 million tons in January.
Australia is likely to export 92 thousand tonnes of coking coal to China in January. The figure will increase to 181 thousand tons in February 2023.
Decreasing demand for thermal coal, especially coming from Europe.
The Baltic Exchange’s shipping index showed it fell 2.6% to 721, its lowest level in 2.5 years. Index calculating vessel and cargo shipments of various commodities, including coal.
CNBC INDONESIA RESEARCH TEAM
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