If only one could rely on the fourth-quarter rally every year as a given. As traders roll their positions, the forward curve is flattening nicely, giving miners the chance to lock in forward prices at very favourable dollar rates.

Coal-fired generation demand has certainly picked up in Asia, together with several coal mine closures and withheld tonnage, thus helping to underpin this latest rally.

However, in dollar terms the market made a lower low, and is currently at a lower high, than that achieved in 2019. Structurally, this is not fundamentally strong, and bodes ominously for what might happen in 2021.

Going forward, higher carbon prices are expected to make coal more expensive into Europe, as the European Union Emissions Trading System enters its fourth phase, with the supply cap declining faster.

We thus expect 2021 to be a year of reckoning for ARA/API2 prices, strangely the coal contract that still seems to attract most liquidity.

In local news, Anglo American mapped out its plans to exit South African and Colombian thermal coal by mid-2023, stating that a de-merger via a listing on the JSE was the most likely route.

Eskom unfortunately had to shed load to the country once more, curtailing operations at Camden, due to safety concerns over the size of the fly-ash dump, and Kendal, due to emissions environmental breaches. Without new baseload capacity coming online soon, it’s hard to see how these stations can be retired any time soon, without plunging the country into continuous load-shedding.

Wow! Momentum has hit an all-time high and price is stretched well beyond the top Bollinger on a weekly chart.

This is a much faster and more volatile move than last year’s, and one can only wonder how long prices can stay at such levels. Perhaps just long enough for everyone to get their forward prices locked in…

Speculatively speaking, one suspects that with all the various changes in management at top-tier trading houses, this could be the last time we see such price gyrations in the market. Nevertheless, the market can of course continue to drift upwards here.

However, without firm fundamentals continuing to support this move, it’s hard to see how much more of a spike we can expect. More likely therefore is to start seeing some profit taking setting in, with a generally sideways drift now, as momentum takes some time to recover.