TELF AG Update on The EU Coal Market and Current Gas Prices – July 31, 2023
European Coal Market Sees Modest Gain and Gas Price Recovery
In the past week, the European coal market experienced a slight price increase, with API2 reaching $101.86 per ton, marking a gain of $2.76, and gCNew rising to $130.98 per ton. The stable spread between API2 and Newcastle at $26.36 per ton facilitated flows from the Atlantic to the Pacific, providing opportunities for trade in the region.
The recent uptick in coal prices was influenced by several factors, including higher-than-seasonal temperatures that have impacted the natural gas market. As gas prices recovered, coal prices experienced a more significant rise, which caught the attention of market participants.
One notable aspect affecting the European market was the high gas storage level. European gas storage levels have been elevated, and as they approach 100%, there may be increasing pressure on gas prices due to reduced flexibility. This scenario may have indirectly contributed to the upward movement of coal prices.
Soft South African coal prices in India led to limited market activity as buyers adopted a wait-and-see approach. Meanwhile, in China, import thermal coal prices remained steady, but a growing sense of caution was observed among market participants. Indonesian and Australian thermal coal prices remained relatively stable, with producers responding to weak prices by slowing down or halting production.
Colombian exporters focused their efforts on the Asian market, as European demand for coal remained low. This strategic shift by Colombian exporters reflected the current market conditions and opportunities in the Asian region.
It is important to note that despite the recent price increment, the market is pricing in a risk premium, even though the fundamentals do not entirely support such an increase. Geopolitical factors remain a significant source of uncertainty in the market, making it difficult to predict future price movements accurately.
Looking ahead, any price correction might come from the gas side, especially if gas storage levels break over the critical threshold of 90%. This development could impact the demand and pricing dynamics in the European coal market.
In summary, the European coal market experienced a modest price gain amid higher temperatures and a recovery in gas prices. At the same time, the fundamentals may not fully support the recent price increment and market uncertainty significantly shaping coal prices. As gas storage levels remain high, potential pressure on gas prices could further influence the coal market’s dynamics. Market participants closely monitor the situation, and any price correction might hinge on gas sector developments.
