Home / Commodities / Commodity News / Coronavirus spreads to hurt global coal market in H1 2020: Platts Analytics

Coronavirus spreads to hurt global coal market in H1 2020: Platts Analytics

Global coal market sentiment remains bearish as coronavirus continues to spread driving economic downturns, S&P Global Platts Analytics said.

“The ultimate impact of the coronavirus on Chinese and overall Asian coal imports and demand will vary with time but is distinctly bearish in the short-term,” Platts Analytics said in its international coal markets forecast. “Until the virus is contained globally, coal demand should suffer and import demand will be limited.”

In China, while the number of new cases are declining, the government continues to restrict movement of millions of people, which Platts Analytics believes is cutting industrial demand and negatively impacting overall GDP and coal consumption within the country.

In the report, they noted coal demand at coastal Chinese power plants is down 30% year on year, while coal burn has declined 15.2% in January and February compared with the 2018 level.

Within global coal markets, upward price movements during February caused by the coronavirus outbreak “eventually gave way to demand fundamentals by the end of February, halting the rally in coal prices seen at the start of the month,” the report said.

“In some ways the COVID-19 outbreak has masked the underlying issue of flat demand,” Platts Analytics added.

Overall, during the first half of the year slow Chinese coal consumption and the economic impact of coronavirus are expected to weigh heavily on global coal prices, leading Platts Analytics to cut virtually all their price forecasts over the next few months.

Southeast Asia is expected to recover quickly due to increasing demand for coal, while in Northeast Asia the Platts Analytics forecast remains bearish due to increasing nuclear generation and pollution control policies, in addition to the major downside demand risks from the virus outbreak.
Export markets

The report also noted the April 2020-March 2021 coal contract price negotiations between Australian coal producers and Japanese power utilities have begun.

“We believe that they will be settled lower than the October 2019 price settlement of $72.75/mt FOB Newcastle, basis 6,322 kcal/kg GAR,” Platts Analytics said. “This will in turn push coal contract prices lower, which will make spot coal prices decrease and keep spot coal competitive with spot gas. This will then see limited coal-to-gas switching opportunities during the summer or 3Q20 quarter.”

While US and Colombian exports continue to slow, with Platts Analytics now forecasting a 5 million mt drop in US exports year on year, Russian exports and production also declined in January.

Platts Analytics maintains its 3 million mt increase in Russian exports this year, “however, we note that with total Russian coal exports dipping in January, exports from the country may be forced to pull back in CY20,” they said. With CIF-ARA spot pricing remaining below $50/mt, Russian shippers are receiving only enough to barely cover short-run marginal costs for the most efficient producers.

Colombia, Platts Analytics also noted, is currently benefitting from low freight rates to India and the Pacific Basin, which may be increasing competition with Russian coals. “That could, in turn, result in less of a drop in Colombian exports for the year,” the report said.
Source: Platts

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping