Newcastle coal slumps to 2-year low as trade jitters worsen
Asia’s benchmark coal price has plunged 10% on the week to its lowest level since May 2017 as a dispute between the US and China fanned fears of a global economic slowdown.
Global Coal last assessed its Newcastle index at USD 71.85/t, down USD 8.32/t on the week.
The Pacific basin’s contract for high grade (6,000 kcal/kg) Australian coal deliveries to Asia has fallen for a seventh consecutive week and now stands 29% below where it began the year.
The consequences of tit-for-tat tariffs between the world’s two biggest economies were making themselves felt in disappointing economic data that has triggered a plunge across commodities.
Societe Generale believed a swift and amiable resolution to be unlikely, it said in a report this week that warned of knock-on impacts for global growth and commodity demand if the dispute worsens.
The French bank trimmed its outlook for Newcastle coal from USD 80/t to USD 75/t by the end of this year, citing an unsustainable 40% premium relative to the 5,500 kcal/kg segment of the market.
A slowdown in thermal power in China and India was “giving domestic coal producers an opportunity to catch up and gain market share, crowding out imports, largely with the blessing of the authorities”, the bank’s analysts said.
Coal prices on China’s Zhengzhou exchange were down 1% on the week at CNY 576.80/t (USD 83.40/t) as they continued to retreat from mid-April’s highs above CNY 620/t.
Coal prices could yet benefit from either a hot summer or a reduction in Russian or Indonesian exports – “the two main sources of incremental supply in recent years”, SocGen said.
North Asia looked likely to see “near normal” temperatures this summer with a repeat of last year’s heatwave that supported air-conditioning demand unlikely, Maxar lead meteorologist Bradley Harvey told Montel.
Indian power plant stocks have continued to contract, declining 5% on the week. Inventories monitored by the country’s Central Electricity Authority last stood at 28.5m tonnes. This was enough to meet 16 days of power generation.
Newcastle coal stocks rose by roughly 470,000 tonnes to 1.82m tonnes in the week through 2 June, according to port data. There were five vessels waiting to take delivery, up from four last week.