Weekly Coal Index Report
Thankfully, the RB1 physical discount has narrowed, with some supply demand balance returning to physical markets.
This helped FOB RBCT to push back above the $50 mark, although RB3 and lower grades remain more heavily discounted. European power, natural gas and crude prices also enjoyed some strength on the week, with carbon prices moderating from their recent highs.
Chinese power demand is weaker, depressing domestic coal prices, although severe flooding on the Yangtze river also means that coal shippers aren’t restocking utilities in the South East. More regular flooding is expected going forward thanks to the volume of arctic ice melt causing rain.
The Newcastle vessel queue has increased from 12 to around 20, with storms and severe weather preventing vessels from docking. However, Newcastle prices remain moribund.
In Botswana, Minergy announced its first export of coal by rail to an industrial consumer in the cement sector. The coal from the Masama mine was transported to the Tshele Hills rail siding, with funding to develop the siding received from BotRail. Coal via rail from Botswana should prove to be much more efficient and bodes well for future Eskom supply going forward.
With physical prices having stabilised somewhat, momentum is now pushing ever upwards into safer, positive territory. However, we need to see a stronger price response now to ensure that when momentum inevitably turns back down, we aren’t faced with collapsing prices.
For now, it seems that the $50 floor level has been supported, which is positive for future runs towards this level. The market however remains quite weak and vulnerable to a downside shift at any point. Meanwhile, it appears that the bears are happy to let the bulls keep digging themselves out of this hole.
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