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Argus: Egypt turns to US coal amid rising spot prices

26 Oct 17, 18:21 - Coal, Steam coal, Fundamentals, Demand, Supply

Barcelona, 26 October (Argus) — Egyptian cement producers turned to cargoes of US high-sulphur coal amid rising API 2 and API 4 physical spot prices, delegates heard today at the 37th Annual World Coal Leaders Network in Barcelona.

As spot prices, especially for South African NAR 6,000 kcal/kg coal, moved above $100/t on a delivered-Egypt basis, Egyptian coal procurers began eyeing US high-sulphur thermal coals, Middle East Business Promotion Centre (MEBPC) president Waleed Abouraya said.

High-grade South African coal for delivery into the Mediterranean port of Alexandria — where customs duties and VAT are reimbursed for coals above a NAR 5,832 kcal/kg — rose to over $100/t on a delivered basis in early August according to Argus estimates. Calculated delivered prices include the weekly average fob Richards Bay price and Supramax freight at $14.75/t.

And delivered prices for high-grade South African coal was estimated at around $106.30/t cif Alexandria last week.

One cement firm has been taking three cargoes of US 2.8pc sulphur coal for every cargo of Russian 0.5pc sulphur coal recently while API 4 prices have been advancing. It booked a cargo of US high sulphur coal basis NAR 6,000 kcal/kg for around $55/t fob gulf coast for loading this month. Supramax freight rates from the US east coast to Egypt's Alexandria port are estimated to be around $16-16.50/t, and rates from the US gulf coast about $19-$19.50/t, market participants said.

US thermal coal shipments to Egypt totalled 520,300t in January-August, climbing from a negligible amount a year earlier, according to the most recent customs data.

And demand for US high-sulphur thermal coals held steady into the fourth quarter, with Egyptian cement producers taking at least two cargoes of US high-sulphur thermal coal for October loading.

US high sulphur thermal coal exports to cement producers have also grown in the wake of advancing US petroleum coke prices. Of Egypt's near 30 cement plants, only two take 100pc petroleum coke, with the rest consuming predominately thermal coals.

US 4.5pc sulphur petroleum coke prices have gained to $82.00/t this week — the highest weekly assessment this year to date — up from $71.50/t during the first week of August. Prices climbed as Hurricane Harvey in the US gulf coast, and heavier crude slates, curtailed supplies.

But Egyptian US high sulphur thermal coal demand "may not continue for long", Abouraya said. When spot prices fall demand for other high-CV coals from origins such as South African will likely grow, because of lower sulphur content and shorter travel times.

South Africa's Richards Bay Coal Terminal (RBCT) sent 682,600t to Egypt in January-September, slipping by 48pc or 630,900t on the year.

New coal handling infrastructure

To align with Egypt's growing coal demand, a new port on the Red Sea will become operational next year. The port will have the capacity to receive Panamax vessels.

There are currently three ports that can unload coal, Alexandria and two on the Red Sea, only one of which — Sokhna — can handle Panamax vessels.

This year Egyptian solid fuels imports are expected to be 4mn-4.5mn t, Abouraya added. And receipts will likely grow to 5mn-5.5mn t in 2018, with a new cement plant expected to start operations, producing 10mn t/yr.

Argus: Chinese coal prices could remain strong in 2018

 Strong power demand from the industrial sector could support Chinese coal prices in 2018, delegates heard at the 37th World Coal Leaders Network in Barcelona last week.
A combination of supply and demand factors including increasing power demand offered supported to coal prices over the first nine months of the year. And strong demand from industry could keep coal prices above the desired 470–600 yuan/t range for Qinhuangdao NAR 5,500 kcal/kg coal, Noble Resources head of commodities research Rodrigo Echeverri said.
In January this year, Chinese economic planning agency the NDRC and the national coal industry association released a joint memorandum stating that China will increase coal production when coal prices exceed the upper band, and decrease production when prices fall below the lower end of this range.
But Qinhuangdao NAR 5,500 kcal/kg coal averaged Yn626/t over the first nine months of the year and is expected to move within a wider range of Yn500-700/t in 2018, Echeverri said.
Argus assessed spot NAR 5,500 kcal/kg domestic coal prices at Yn717.13/t fob Qinhuangdao port on 27 October.
Spot prices of Chinese NAR 5,500 kcal/kg coal ranged from Yn555.83-727.17/t on a fob Qinhuangdao port basis in January-October, according to Argus assessments, well above a Yn367.54-670.19/t range in the same period last year.
Strong industrial activity has bolstered demand for coal in China this year as the official purchasing managers index (PMI) increased to 52.4 in in September from 51.7 in August — the fastest growth since April 2012, according to data from the country's national bureau of statistics.
Overall industrial power consumption increased by 6pc on the previous year to 3,263TWh in the first nine months of the year, supported by gains in consumption by heavy and light industries. Thermal power generation, which is largely based on coal-fired power, rose to 3,452.5TWh, up by 6.3pc from the same period last year.
Moreover, China's global infrastructure development programme — "the one belt one road initiative" — might also increase demand for coal from the industry, consultancy Perret Associates director Guillaume Perret said. Chinese coal imports will stay within a 150mn–200mn t/yr range until 2020, he said.
But a possible slowdown in the real estate industry and supply-side reforms that aim to reduce industrial output still continue to pose downside risks for coal demand in the country.
Cement production fell to 1.76bn t in January-September, 4.09mn t lower compared with the same period last year amid restrictions on property purchases in the country as well as a slowdown in the real-estate industry. Cumulative growth in real estate investments fell from this year's peak of 9.3pc in January-April to 8.1pc in January-September.

Montel: EU coal-fired capacity could drop 65% by 2025 – analyst

Strict EU emissions limits could result in a reduction of more than 450 TWh – or nearly 65% from 2016 levels – in European coal and lignite-fired generation capacity by 2025, Trevor Sikorski, of consultancy Energy Aspects, said on Thursday.

New EU standards for large combustion plants will regulate emissions of mercury in addition to those of sulphur (SO2), and nitrous oxide (NOx).

“This is just from one piece of legislation, and is enormous,” Sikorski said at a Coaltrans conference in Barcelona, in regard to “a revised LCP Bref” document, which will apply to all of Europe’s coal-fired power stations from 2021.

Total coal and lignite generation capacity could decline by nearly 50%, from 641 TWh in 2016 to 330 TWh by 2025, according to Energy Aspects estimates.

“But this is our most conservative case,” he said, adding “hard coal is also going to be challenged by a low gas-price environment in Europe”.

Montel reported in June that up to 56% of Europe’s large coal and lignite-fired plants could close by 2025 as they will struggle to comply with new EU environment laws, citing Energy Aspects estimates.


Montel: China coal prices to establish wider, more volatile, range next year

Chinese government efforts to curb domestic coal prices this year have proven unsuccessful, and a higher, albeit more volatile, range can be expected for 2018, an analyst at Noble Group said on Thursday.

“We believe that the CNY 500-570/t (USD 75-86/t) price range, established by the [National Development and Reform Commission, or NDRC] in 2016 no longer applies,” said Rodrigo Echeverri, the group’s head of hard commodities analysis, at a Coaltrans conference in Barcelona.

The year-to-date average spot price in China has been CNY 626/t, he said, adding “this is entirely outside of the range set last year, so this band does not exist, and we should forget about it”.

“Our view going forward is that domestic Chinese prices will be centred around CNY 600/t,” he said, adding, however, the price would likely fluctuate by quite a substantial CNY 100 above or below this level.

“This high level of volatility will occur as the Chinese grid becomes more diverse in terms of energy sources, such as wind and solar, and the Chinese grid will become increasingly complex,” he said.

While there was slowing Chinese import growth, import volumes remained strong, he said.

According to Noble estimates, China will import 195m tonnes of seaborne thermal coal this year, up 25m tonnes year on year.

But they are forecast to decline to 185m tonnes next year.

Chinese domestic coal prices are a key driver for global seaborne prices.


Montel: Polish thermal coal imports set to rise 25% – trader

Polish thermal coal imports were on track to rise 25% this year to around 10m tonnes, due to lower-than-expected production, the managing director of a Polish coal trading firm said on Thursday.

“There is a production decline, due to the high costs associated with deep-pit mining,” he told Montel on the sidelines of a Coaltrans conference in Barcelona.

All of Poland’s hard coal production is from deep-pit mines, he said, noting “it is not worth exploring new, lower seams at present”.

State-owned miner PGG, for example, is likely to fall short of its 32m-tonne 2017 output target by around 2m tonnes, according to the managing director, who asked not to be identified.

Poland imports the bulk of its thermal coal from Russia, with smaller volumes sourced from Colombia and the US, he said, noting US high calorific value coal is blended with domestic lower-grade produce.

Russian thermal coal exports to Poland jumped 24% year on year to 6.4m tonnes in the first eight months of the year, Montel reported earlier this month.

Meanwhile, there was some concern about winter supply to Poland, in light of rail bottlenecks on the Russia-Poland route.

“It has been suggested that more coal must be imported by sea, but it looks as though the bottleneck is easing,” he said, noting it was unclear what had caused the build-up in rail traffic.


Montel: Russian coal port sees record exports to Europe

Russia’s largest hub for coal exports to Europe will likely handle a record 21m tonnes this year, up 16% from 2016, a spokesman for Ust-Luga’s Rosterminalugol terminal, near St Petersburg, told Montel on Thursday.

The increase largely reflected an increase in the port’s efficiency, coupled with still strong demand for Russian coal, Mikhail Fraynt said on the sidelines of a Coaltrans conference in Barcelona.

A decline in exports to the UK – where coal-burn levels have diminished sharply over the past two years – have been offset by healthy demand from alternative origins, he noted.

Although most cargoes from Ust-Luga are shipped to northwest European ports, some cargoes have been shipped to South America, and even Asia, he said.

“We have shipped cargoes [via the Arctic shipping route] this year to India and Malaysia,” he said, noting more such shipments were anticipated for the coming year.

The terminal, which mainly handles coal from Russia’s key Kuznetsk basin coal-producing region, has been actively expanding capacity since it began operations in 2010.

Russia is Europe's largest supplier of thermal coal.


Montel: Turkish coal imports may rise 10% in 2018 – utility

Turkey’s thermal coal imports could rise 10% year on year to 33m tonnes in 2018, thanks to an expected increase in coal-fired generation, said a manager at Turkish power firm Isken on Thursday.

The anticipated increase in imports comes as Turkey is due to launch a new coal-fired plant by the end of the year, Mehmet Topeli told Montel in the sidelines of Coaltrans conference in Barcelona.

He said that Turkey’s coal imports for 2017 will likely remain unchanged year on year at around 30m tonnes.

Turkey aims to increase its capacity of coal-fired generation in the coming years, although most of the new demand will be met by local coal production, the utility manager said, adding the government “won’t give any incentive for imported coal”.

In the first eight months of the year Turkey imported 24m tonnes of all coal types, up by around 5.7% against the corresponding period last year, Montel reported earlier this month.

Turkey imported most of its coal from Colombia in 2016.

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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