keywords :
Stressed financial markets have begun to indirectly impact global coal markets, putting pressure on pricing, a Platts Analytics report said.
“The drop in crude oil prices continues to impact the coal market, although the impact is more indirect,” the report said.
Oil prices falling to new lows just above $30/bbl can pressure gas and coal prices, especially in markets with fuel competition, such as Europe.
Platts Analytics sees the potential for oil prices as low as $25/bbl over the next few weeks.
The report also noted continuing headwinds for coal generation in the European electricity market, despite a small rebound in gas forward prices recently.
While gas prices rose to their highest level since February, EU carbon allowance prices declined to an 11-year low.
“Meanwhile, we expect cooler temperatures across Europe for the second half of March, which could see an increased coal-fired power generation, particularly in Germany,” Platts Analytics said.
Otherwise, the recently volatile stock market, which has moved now into bear territory “has seen commodity producer currencies tumble, as investors looked to so-called ‘safe haven’ currencies,” the report noted.
In the past week, the Australian dollar hit an 11-year low over the past week against the US dollar.
“Since sales of seaborne coal are done in US dollars and most producer costs are paid in local currency, a fall in the Australian dollar could mean higher margins and added incentive for producers to continue exporting at high levels,” Platts Analytics said.
COVID-19
Platts Analytics expects more countries to implement fiscal stimulus packages as they combat the coronavirus, or COVID-19 pandemic.
Last week, Australia, the UK and the US announced plans, in addition to Italy and South Korea.
“In China, stimulus would likely underpin industrial demand and be supportive of additional coal consumption,” the report said.
However, Platts Analytics noted, “China continues to be surprising.”
“After a surge in coal imports in January and February, it has seen some ports in southern China implement import restrictions as quotas amazingly have been reached just two months into the year,” Platts Analytics wrote.
Largely, though, North Asian coal import demand is flat or expected to decline, while demand in Southeast Asia continues to increase.
Overall, the full effect of the coronavirus has yet to be seen, and data will not be completed for months to come.
Source: Platts