Thermal Coal
Prices Peak and Ease as Supply Gradually Increases
September 2017
The August spot price for premium Australian thermal coal averaged US$98/t FOB Newcastle, up 10% from July. The price steadily inceased to US$100/t over the course of the month on the back of continued tight Chinese domestic supply combined with increased demand.

Moreover, industrial action at five of Glencore’s operations since June of 2017 has removed over 5Mt thermal coal from the market. The spot price for Newcastle high ash thermal coal averaged US$75/t in August, an increase of 4% on month.

During August, the European CIF ARA spot price was supported by the strong Newcastle FOB market. The spot price for CIF ARA 6000 NAR thermal coal averaged US$86/t for the month, an increase of 4% from July. However, by the end of the month, the differential between the Newcastle premium thermal FOB price and CIF ARA 6000NAR narrowed to ~US$10/t, from ~US$15/t at the start of August.

Chinese domestic thermal coal prices eased in August, with 5,500 NAR FOB Qinhuangdao sales decreasing 1% over the course of the month to US$81/t after the central government relaxed its restrictions and additional Chinese domestic production trickled onto the market.

South African 5,500 NAR thermal coal spot prices averaged US$73/t in August, an increase of 1% on month. Likewise,  products sold FOB Colombia averaged US$79/t and FOB Russia averaged US$82/t, each increasing 1%, due to stable European demand. In contrast, Russian spot sales into the Pacific market experinced a strong price rise, with deliveries averaging US$102/t, up 18% month on month, affected by a rail outage.

The additional Chinese thermal production allowed by the central government as it eases its capacity restrictions will take a couple of months to reenter the market.