(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, Feb 13 (Reuters) - The prices of
thermal coal and spot liquefied natural gas (LNG) in Asia are
declining amid the two prongs of weaker demand in Europe and
China for the fuels used to generate electricity and heat homes.
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.
LNG DIPS
Similar to thermal coal, a drop in demand from China and
from Europe is freeing up spot LNG cargoes and contributing to
lower prices.
China is on track to import about 4.47 million tonnes of the
super-chilled fuel in February, down from 6.12 million in
January and 7.28 million in December, according to Kpler data.
While lower imports have an element of seasonality to them,
dropping as peak winter demand eases, it's worth noting that
China's arrivals in February are likely to be below the 4.95
million tonnes from the same month last year.
Europe's LNG imports are expected to drop to 10.49 million
tonnes in February, down from 12.49 million January and a record
high of 13.44 million in December.
Similar to thermal coal, Europe's LNG demand was shifted
structurally higher as a result of the move away from Russian
pipeline gas after Russia's attack on Ukraine, which Russia
calls a "special military operation".
This may mean that spot LNG and thermal coal prices may
remain at levels that appear elevated compared with the average
of the last decade, especially as new supply will only arrive in
significant volumes for LNG around 2025.
China's re-opening after it abandoned its zero-COVID policy
may also spur higher energy consumption, but it remains to be
seen whether domestic coal output can remain at near record
levels or whether utilities will turn more to the seaborne
market.
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GRAPHIC-Asia, Europe LNG imports vs Asia spot price: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Editing by Robert Birsel)
Messaging: clyde.russell.thomsonreuters.com@reuters.net))
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