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Vale Update on Coal Segment Performance in 2019

Coal News - Published on Fri, 21 Feb 2020

Image Source: Vale Coal
Seaborne coking coal prices averaged USD 177.0 per tonne in 2019, 15% lower than in 2018, and averaged USD 140.0 per tonne in 4Q19, 13% lower than in 3Q19. Poor performance of seaborne coking coal during the year was mainly driven by factors in 2H19 such as
(i) Weak macro data in India, due to lower housing and infrastructure spending over an extended monsoon period and weak auto sales and consumer spending
(ii) Shutdown of several blast furnaces in Europe due to weak steel margins due to high carbon prices, steel raw material prices and weak auto sales because of trade concerns
(iii) Decrease in coke prices and domestic coking coal prices in China
(iv) Lower crude steel production in Japan with completion of Olympic Games demand and weak auto sales
(v) Steady supply from Australia with no disruptions, as those observed in 2018

Seaborne coking coal market should remain bearish on prices, mainly due to lower than expected growth in Indian steel demand and emerging uncertainties due to coronavirus in China. Support can be seen from growing demand for coking coal with commissioning of new blast furnaces in Southeast Asia.

In the thermal coal market, Richards Bay FOB price averaged USD 71.5 per tonne in 2019, 27% lower than in 2018 and averaged USD 75.8 per tonne in 4Q19, 40% higher than in 3Q19. Weaker prices in the year were mainly driven by
(i) Lower LNG prices due to rise in gas supply by 12% amid warm winters
(ii) Higher carbon prices in Europe squeezing the margins for coal fired power generation
(iii) Rising alternate power generation sources such as renewables in Europe, hydro in China, nuclear in Japan and Korea
(iv) Weaker seasonal demand in India due to monsoon period
(v) Higher stock levels in China amid warm winters and steady domestic coal supply;
(vi) Rise in Indonesian thermal coal production by 10%

Thermal coal market sentiment remains negative due to the same drivers observed in 2019 and added uncertainties around the coronavirus, impacting industrial demand and power generation in China. However, prices should be supported by steady demand from the Indian DRI (Direct Reduction Iron) sector due to their technical dependence on this type of coal.

Source :

Posted By : Yogender Pancholi on Fri, 21 Feb 2020
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