Coal prices came down to earth in a sustained sell-off last week, as the market tried to find a level amidst falling global natgas prices and Chinese domestic coal prices. Demand destruction, price caps and forced shutdowns of some parts of Chinese industry have helped reign in runaway makets.
Beijing officials have been cracking down on coal futures speculation and encouraging miners to produce at full tilt, despite safety concerns, in a measured response to recent prices. The government is also taking a firm stance against those hoarding coal as a cold winter looks to be on the cards.
The measured response has also seen metals prices cool off, although magnesium production is also lower on weaker industrial intensity, leading to a spike in price and risk to vehicle supplies going forward.
Freight prices continue firm as a lack of containers is leading sugar and rice shippers – amongst others – to return to dry bulkers, while Capesize congestion in Pacific markets continues.
An expected freezing winter in North America and Europe could see further strain being put on global supply chains and energy supply. However, some US grid operators are restricting coal-fired plants from operating if their fuel supplies fall below certain levels, to ensure coal will be available in the case of a deep freeze later on.
In an interesting development, Eskom has signed a memorandum of understanding with coal suppliers Exxaro Resources and Seriti Resources to develop their own renewable energy projects. A really innovative approach could be to simply deliver kilowatt-hours to Eskom, the choice of whether it was delivered in coal or power being up to the miner or independent power producer concerned.
Agri-PV could be a very healthy and positive trend for coal miners – and their communities – going forward.