Home / Commodities / Commodity News / Tepid demand, falling gas prices to weigh on Q4, 2020 thermal coal outlook: Citi

Tepid demand, falling gas prices to weigh on Q4, 2020 thermal coal outlook: Citi

The outlook for the thermal coal market for Q4 as well as for the whole of 2020 is expected to be weak amid tepid global energy demand and falling natural gas prices, Citi analysts said on Monday.

The analysts noted that a drop in global energy demand and falling gas prices should continue to limit the use of coal, while “rising supplies from India, Colombia and South Africa, despite low prices, are set to shift the seaborne market into surplus in 2020.”

In China, domestic supply also outweighs demand, causing prices to be pressured lower, though its appetite for imported coal remains strong as seaborne thermal coal prices have dropped at an even faster pace compared with that of domestic prices.

Chinese spot domestic thermal coal prices of 5,500 kcal/kg NAR grade cargoes hovered around the range of Yuan 580-620/mt FOB Qinhuangdao this year, according to S&P Global Platts data.

The analysts noted that Southeast Asia remains a key demand driver for coal thanks to the construction of new coal-fired power plants, including a new 2-GW coal-fired power capacity in Malaysia in H2 2019.

India’s thermal coal imports had jumped by more than 21% year on year in H1, on the back of strong demand from power plants, while its domestic production remained weak, partly due to heavy rain in western India and security issues at some of the mines.

However, the analysts said, the ongoing slowdown in the macro-economy and the recent monsoon-led demand weakness could hit thermal generation and dampen demand for imported coal.

Yet, the slowdown in advanced economies, including the EU and the US, should more than offset increases from Southeast Asia and India, the analysts said.
Source: Platts

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