Thermal Coal Continues to Advance

Newcastle coal futures continue to rise and are now up more than 40% YTD. Price data shows that at the turn of the year the price per ton was still around $155 whereas now it has already reached $224 per ton.

The price jump since the beginning of the year is mainly due to the ban on coal exports imposed by Indonesia. The country has seen a risk of a nationwide blackout and has called on coal producers in the country to comply with the law that forces them to sell 25% of their output to local power producers for a fixed price of $70 per ton. For coal producers, of course, this is not at all lucrative, as world coal prices have now more than doubled.

However, according to the latest reports, many producers were able to resume exports after selling the promised amount to local energy producers. Among the largest buyers of Indonesian coal are China, Japan, and also South Korea.

China, meanwhile, produced coal at record levels last year. In 2021, Chinese coal mines produced 4.07 billion tons of coal, an increase of 4.7% over the previous year. In December alone, according to data, 384 million tons were produced, an increase of 7.2% year on year. The Chinese government has asked its coal mines to maximum production after it came in many regions to power outages. In addition, there have been recent problems with Australia, which used to be the main coal supplier.

Coal producers are still up YTD despite the current sell-off in the markets. Here, one should also mention Glencore which, unlike many of its competitors, sees no reason to discontinue its coal production. The price of Glencore shares is up over 43% over 1 year. If the sales continue, some bargains could appear on the market.

NameTickerPrice%YTDWeek %% 1Y
BHP GroupBHP$64.617.06%-3.52%-10.00%
Rio Tinto GroupRIO$73.279.46%-2.82%-9.99%
Vale S.A.VALE$15.319.20%-0.46%-11.04%
GlencoreGLNCY$10.564.76%-4.52%43.09%

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