Commodity Market Report

Thermal coal markets - short-term outlook - November 2020

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30 November 2020

Thermal coal markets - short-term outlook - November 2020

Report summary

The thermal coal market received a welcome injection in November. Multiple vaccine study results showing a high level of effectiveness were announced, boosting optimism about a global economic recovery. The rally in Newcastle 6,000 nar coal prices accelerated, while oil prices continued their strong recovery and North Asian LNG prices firmed. Domestic coal prices in China continued their upward trajectory ahead of winter, spurring rumours of the imminent release of more import quota to meet insufficient domestic supply. We now expect seaborne thermal coal imports will increase into China in November and accelerate into December. With no end in sight to the Australia-China trade tensions, there have been various rumours that restrictions may last into Q1 2021. Despite the increasing likelihood of changes to trade patters continuing into next year, 2021 is shaping up to be a better year for producers and prices.

Table of contents

  • General discussion and base case
    • While our base case forecast assumes a moderate expectation around virus containment and economic recovery, the level of risk around COVID-19 remains substantial, despite positive news of vaccine development. In this short-term outlook, we have updated our low case for the benchmark seaborne thermal coal price to help our clients quantify the risk, and have added in a high case, assuming a quicker than expected economic recovery.
    • Low case scenario: COVID-19 continues to restrict economic activity
    • High case scenario: Accelerated vaccine deployment, economic recovery and government stimulus
  • China – imports set to accelerate into December
  • India - recovery in Indian steel demand prompts buying of South African coal
    • Japan
    • South Korea
  • Other Asia – underperforming in November, set to recover in December
  • Europe – Lockdowns extended in Germany, while France and UK stage reopening
  • Turkey – cement makers to capitalise on widening coal - petcoke spread
  • Australia – China trade dwindles, as exporters chase other markets
  • Indonesia – exports may struggle to catch up in Q4
  • Colombia – awaiting the imminent return of Cerrejon
  • Russia – December rail capacity quota to limit potential growth to China

Tables and charts

This report includes 9 images and tables including:

  • China market prices US$/t
  • Newcastle price differentials (US$/t)
  • Key prices - history and forecast (nominal, US$/t)
  • China seaborne thermal coal imports
  • Australian coal exports to China 19 v 20
  • Australian coal exports to China by coal type
  • Indonesia coal production and exports
  • Low and high cases for Newcastle 6,000 nar at various confidence intervals
  • North Asia - coal to gas switching economics

What's included

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    Thermal coal markets - short-term outlook - November 2020

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