Asian thermal coal prices surge on supply shortages, firm summer demand  

London - (Quantum Commodity Intelligence) – Benchmark Australian thermal coal prices surged to multi-year highs during the first week of June amid tight supply and rising demand for electricity.

Both futures and physical prices moved above $120 per metric ton for 6,000 kilocalorie per kilogramme (kcal/kg) coal at Newcastle Port, according to Exchange and trade data – reported as the highest levels in at least a decade.

Exchange data from ICE shows futures prices have doubled since November of 2020 and are up by around 30% since the beginning of May.

"Thermal coal’s remarkable comeback continues," said Morgan Stanley in a note earlier June. "China’s domestic coal shortage is still expanding. At the same time, summer stocking demand from Japan, South Korea and Taiwan is picking up. "

A clampdown on dangerous mines by the Chinese has coincided with a slowdown in hydropower and a surge in power demand – reported as up 14% year-on-year in April.

The 6,000 kcal/kg grade is a quality favored by Japanese and South Korean power generators, while lower-energy 4,200 kcal/kg settled June 8 at $56.93/mt (June loading) on Singapore’s SGX, compared to around $38/mt in mid-May

Following a trade spat between China and Australia, China has ramped up imports of the lower-energy grade from Indonesia but shipments have dropped by around 15% from pre-pandemic levels, in part due to heavy rainfall and flooded mines.

Bloomberg reported Wednesday that China is considering price controls on coal, which would limit the price power generators can pay.

A number of Chinese provinces are currently experiencing power shortages, which has also helped to push Asian LNG prices to around 11/mmBtu – a historically high summer price.

Despite the marginalization of coal, global coal-fired power capacity between 2000 and 2020 doubled its to around 2,045 gigawatts (GW) after explosive growth in China and India.