LNG, thermal coal prices slip as China, Europe buying pulls back

The main grades of seaborne thermal coal also declined last week, with the Australian benchmark Newcastle Index , as assessed by commodity price reporting agency Argus, slipping to $227.63 a tonne, the lowest since January 2022 and about half of the record $442.89 reached in September last year.

The price of spot LNG for delivery to north Asia dropped to $17 per million British thermal units (mmBtu) last week, the weakest since August 2021 and down 76% from the record high of $70.50 reached in the week to Aug. 26 last year.

The main grades of seaborne thermal coal also declined last week, with the Australian benchmark Newcastle Index , as assessed by commodity price reporting agency Argus, slipping to $227.63 a tonne, the lowest since January 2022 and about half of the record $442.89 reached in September last year.

The Newcastle Index only covers a relatively small portion of the seaborne thermal coal market, reflecting higher energy cargoes bought mainly by utilities in Japan and South Korea.

The price of Australian thermal coal with an energy content of 5,500 kilocalories per kg (kcal/kg) dropped to a 13-month low of $126.10 a tonne in the week to Feb. 10, and is now down 55.6% from its record high of $284.20 reached on March 11, in the wake of Russia’s invasion of Ukraine.

This grade is popular with utilities in India and in Southeast Asia, and was the most-sought after Australian thermal coal by China prior to its informal ban on imports from Australia in 2020, which has recently been lifted.

Low-rank Indonesian coal with an energy content of 4,200 kcal/kg slid to $71.69 a tonne in the week to Feb. 10, the weakest since January 2022 and down 41% from its 2022 high of $120.86 from mid-March.

This grade is preferred by Chinese utilities, which value its low ash and sulphur content, allowing for blending with higher ash and sulphur domestic supplies.

The drop in prices for seaborne thermal coal comes as China, the world’s biggest importer, buys fewer cargoes, with commodity analysts Kpler estimating February arrivals at 13.41 million tonnes, down from an estimated 20.24 million tonnes in January and 23.81 million in December.

While the February figure will rise before the end of the month as more cargoes are assessed, it’s still likely that it will be well below the outcome of the previous two months.

A mild winter and strong domestic output have limited China’s appetite for imported thermal coal, putting downward pressure on prices, especially for Indonesian grades.

Europe’s imports of seaborne thermal coal are also dropping, with Kpler estimating February arrivals of 6.61 million tonnes, down from 8.16 million in January and 8.75 million in December.

A mild winter combined with adequate stockpiles of natural gas have limited the need for coal-fired generation, although it’s worth noting that Europe’s thermal coal imports have moved structurally higher in the wake of the war in Ukraine, with this February’s imports already some 12% above the same month in 2022.