DTC Coal “Week Ahead” Flash
Catalysts We are Watching
Each Monday we provide you with a concise preview of the key events taking place in the coming week that will have the biggest impact on the coal markets. We outline the major data releases and events that you need to know about complete with our expert opinion to make sure you are prepared for the week ahead.
DTC Flash©: The Week Ahead – 04 Dec 2017
Catalysts We are Watching:
- Indian Cement Producers Turn to Coal on Petcoke Ban: Some cement producers in India are switching back to coal from petcoke after the country’s Supreme Court banned the use of the raw material in Uttar Pradesh, Haryana and Rajasthan, all surrounding New Delhi. The move is aimed at reducing pollution from the high-sulfur fuel which is a byproduct of oil production. Sulfur levels in petcoke can be double the content in ILB coal. The courts in India are also considering a nationwide ban on petcoke imports – that decision could come as soon as today (December 4.) The replacement fuel would mostly be coal but natural gas can also be used in some situations. The move away from petcoke is expected to hurt cement companies both financially and logistically. Cement producers have noted challenges to finding acceptable quantities of petcoke since Hurricane Harvey affected U.S. refineries in Texas earlier this year so some of this switch has already been happening. The price of petcoke has also moved higher because of the outages, currently trading for close to $107/Mt compared to about $40/Mt in 2016. With regards to coal: “New linkages are not available for the cement industry. While theoretically, the cost/kilocalorie of linkage coal works out to be cheaper, the coal available is of a grade which can be used only for captive power plants and is not suitable for use in kilns,” Edelweiss Securities Ltd said in a report. Companies will likely be forced to turn to the import market but those prices are approx. 30% higher than petcoke price. We speculate implementation of this ban has the potential to provide a big boost for seaborne thermal coal demand which would also benefit US producers.
- China Natgas, LNG Demand Up, Moving Prices Higher: The China-Central Asia natural gas pipeline has transported a total of 200 billion cubic meters of natural gas since it started operation in December 2009, meeting demand in the world’s second-largest liquefied natural gas importer, according to China National Petroleum Corp, the country’s largest oil and gas supplier and producer. However, Bloomberg has reported that China’s efforts to boost natural gas demand worked so well sellers are running out of supply just two weeks into the winter heating season which has been compounded by the Country’s efforts to reduce reliance on coal. Natgas demand is up by 19% this year, according the Bloomberg, and is on track for the highest growth since 2011. LNG imports are up 48% YoY through October which is forcing suppliers to raise prices by 10-20%.
This DTC Coal “Week Ahead” Flash report also looks at:
- JFY Q3 Coking Coal Benchmark Approaches
- Global Thermal Prices Approach $50/MT
- Fire at Nippon’s Kawasaki Steel Plant
- More Cool Weather for Midwest
- Natgas Falls as Shoulder Season Approaches