Thermal coal prices fell last week, with the Newcastle spot index quote finishing 5.4% lower, while Richards Bay lost 3.2%. Newcastle spot is now down almost 10% over the last month of trade.
A key reason for the slide in thermal coal prices has been an absence of supply constraints in China. Thermal coal is currently more widely available than it has been at this time of the year in recent years. Combined with slowing industrial output, particularly in more energy intensive sectors, plus a seasonally strong contribution to power output from China’s hydro power stations, and China’s thermal coal market is well supplied.
This has meant less interest in thermal coal imports and concomitant easing in Asia Pacific thermal coal markets. Strong GDP growth in Europe is supporting thermal coal demand there, but some slowing in Indian demand has amplified the muted conditions in China. We don’t expect large further price falls from here in the near term but equally can’t see catalysts for a strong price rally.