At the beginning of 2013, thermal coal spot markets had remained rather calm over the holiday period, with little movement seen in the prices around the major markets. By the end of the year, there had only been a small change in the spot prices compared to how 2013 had started out, and the large movements of some previous years were absent last year. A year ago, the spot market in northern regions were expected to firm during the first quarter of 2013 due to seasonal increases in demand for thermal coal, and a rise was expected to have a knock-on effect on thermal coal spot prices in the southern hemisphere markets as well. Market analysts appeared to have taken a mildly bullish sentiment to the coal market in 2013, with an overall improvement expected over the course of the year compared to 2012. US exporters were taking some comfort from the expectation of renewed demand from parts of Europe in 2013, with Germany being seen as one market to tap. Colombia’s plans to expand coal production, however, were likely to compete with other suppliers’ hopes for Europe. China had been importing record monthly amounts of thermal coal, and market players did not appear to believe this would change much for the following months. An increase in the price of natural gas was expected to see renewed consumption of coal in some major economies including the USA. One market to watch more closely in the early months of last year was South Africa which was expected to see growing demand from Europe. India and China were expected to show continued growth in demand, which was then anticipated to influence Atlantic markets. A year ago, coking coal spot markets had yet to show much activity after the holiday break, with little business being reported in January. So, overall, the initial expectations for the international coal industry as 2013 got under way were not as depressing as they had been for the previous couple of years, and some more positive aspects were hoped for in 2013. The year had also begun with a firming in the freight rates on the major coal routes.

Early 2013 saw weak thermal coal spot market activity, with a similar result in the coking coal spot markets. There were few significant factors set to influence the position, with a plummet in the price of Chinese coke and some disruption to Canadian supply being the most noticeable. Canadian coal producers were having problems hauling coal by road and rail to the ports on the west coast due to snow and ice during the winter freeze — an annual event that does not appear to have been so severe this winter so far. Further south, there was optimism that the Brazilian steel sector would pick up in 2013, ahead of the Olympic Games and soccer World Cup events there. The hard coking coal market was difficult to assess due to mixed comments from players, depending on their individual positions. Some sellers and traders were bullish, but there was limited evidence of increased trade at firmer prices.


The Asian spot tender market was the most visible in early 2013, with a significant availability of Indonesian sub-bituminous coal apparent for delivery during the first half based on responses to enquiries at the time. In north India, the coldest weather since the early 1970s was expected to result in an increase in coal burn, and in turn, traders were anticipating that the stocks reported at the ports were going to decrease. Some shippers, particularly in South Africa and Indonesia, were preparing for firmer demand for imported coal in India in the following few months. In South Africa, however, there were already fears that industrial disputes could disrupt the coal chain during 2013, and lead to some tightening of coal supply to India and elsewhere.


The supply of coking coal from Queensland was being disrupted by adverse weather, as well as the earlier threat of industrial action by coal train drivers. As the international coking coal market became a little more active as 2013 got under way, there were optimistic forecasts that China’s demand for steel would increase during the year, and output was forecast to rise by 3–4.5% to reach about 750mt (million tonnes). In 2012, production had increased to 716.5mt. Disruption of Atlantic supplies of thermal coal were feared by some players as workers at Cerrejon’s operations in Colombia prepared to vote on strike action in February. There was an expectation that a strike was unlikely, however, as the markets had not reacted in such a way as to push up prices by that stage. While spot market activity in Europe was still lacklustre, the Asian buyers continued to issue spot tenders on a regular basis. Coal India Limited was also expected to begin purchasing imported coal in its own right.


By the start of the second quarter of 2013, there had been weakness in the Asian thermal and coking coal spot markets. Although some buyers were said to be bidding lower prices for hard coking coal, there were few deals being done at those levels. Nevertheless, some journalists were believed to be lowering the level of their price reporting without any confirmed deals to support those prices. While spot markets remained lacklustre it was in the spot tender and contract markets that business continued to be done at reasonable levels. The Asian spot tender market remained the most visible, particularly in Korea and Taiwan where indications of the state of the thermal coal market were best shown, in terms of tonnage, quality, and price. The European coking and thermal coal markets were quiet, although contract business was clearly showing coal deliveries were continuing into the ARA (Antwerp–Rotterdam–Amsterdam) ports and the United Kingdom. Russian coal continued to be purchased by the UK generators, and higher sulphur material at discounted prices from the USA and elsewhere was of interest to those consumers with scrubber technologies at their plant. There had also been renewed thermal coal spot tender activity in Eastern Europe, and spot market activity on electronic platforms picked up.

The relatively soft price of thermal coal in the Atlantic market did not correspond with some reports that the European utilities had been keen to buy coal during April. The material to supply some of them may have been taken up from the pads at Rotterdam, but coal stocks at the ARA ports were said to have been depleting during the month. The cold snap in northern Europe had kept up demand for electricity and coal, which helped boost spot prices above previous levels. The renewed availability of Colombian coal, however, countered upward pressure on the spot price to some extent. Traders also reported that thermal coal to supply Europe would be available at Richards Bay when the enquiries arose. In the Asian thermal coal market, buyers were understood to be holding off new business while negotiations on the JFY2013 contract were ongoing. With a price settled at US$95.00/t FOB (free on board) the shippers were likely to cut costs and supply by reducing output further in the following months.


By April, European buyers were taking some US tonnage in the thermal coal spot tender market, while the Asian spot market softened by a couple of dollars per tonne. Coal stocks had been building in Europe as contract tonnage arrived at the ports, and this had been sending some signals to suppliers that demand would be more subdued in the spot markets. Chinese buyers of thermal coal were limited by adequate domestic supply at the time, and the main visible players in the Asian markets were the Korean gencos. Indian buyers were seeking mainly lower CV Indonesian sub- bituminous material ahead of the monsoon, and South African and other exporters were not seeing high demand for their products from India. There had been some reports of buyers of cargoes destined for China reneging on their contracts, with Australian, South African and US coal rumoured to have been affected.

By the middle of 2013, thermal coal spot markets had been seeing a softening in all regions. A weak rupee was impacting coal buyers in India at the time, and there were already rumours of some defaults on contracts. The Russian exporters were facing some rail disruptions.

While Africa has been the focus of much investment in the coal sector in more economically buoyant years, some areas had developed problems including a resurgence of terrorist action in Mozambique. In the freight market, Capesize rates had eased a little after the earlier rally which was largely attributed to iron ore shipments in Asia.


The thermal coal spot markets were behaving rather differently in the Atlantic and Asian regions during July, with weakness persisting in the latter. Thermal coal spot prices softened further out of all the main locations as lacklustre prompt spot demand in the Asian consumer destinations continued. There had been new enquiries, however, in the spot tender market from the major buyers in India, Korea and Taiwan during early July. Other buyers were expected to enter the spot tender market again during the following few weeks to take advantage of the weak prices ahead of the final quarter when markets could have recovered somewhat. An overall weakness in the spot markets across the globe had not been evident at that time, and the Atlantic spot prices were relatively stable after a couple of small dips and recoveries. Indian domestic coal production continued to fall behind target amid a growing demand situation, and Coal India was reported to have been 8% below target in June at 32.57mt. Planned electricity generating capacity continued to grow there, with imported coal the only realistic option to satisfy expected demand. There had been hard evidence of production cutbacks in the US coking coal sector by mid- 2013, with job losses expected.


Buyers in Taiwan remained active in the spot tender market, seeking additional bituminous coal in July. Atlantic business had been lacklustre, with little movement seen in the spot markets. Coking coal spot markets remained extremely quiet in all areas with little sign of activity expected in the following weeks. In the freight market, the quantity of newbuilds was reported to have decreased during the second quarter of 2013 to the lowest level for four years. This appeared to confirm the volume had peaked, which was expected to influence rates in the coming year as supply of vessels stabilized again. Australian shippers appeared to have found a level for their spot sales, but Indonesian sellers were still finding a range of interest across their coal types. The Chinese thermal coal buyers continued to push for lower prices, and spot tender business in Korea and Taiwan provided for the most visible activity. The industrial dispute by workers at Drummond had an effect on coal markets in the north Atlantic, with a slight rise in the price of coal delivered to Europe. The strike was disrupting production and ship loading in Colombia, with about a third of the country’s coal supply affected. Demand for coal in the spot market was still relatively quiet in Europe, however, and supplies from the USA, Russia, Poland, South Africa, and elsewhere appeared to be adequate to prevent much of a firming in the spot price. Force majeure had been declared on a number of cargoes, and vessels were being delayed at Puerto Drummond and some had been diverted elsewhere. By early August, European traders had been locking in tonnage for delivery in 2014 from other supplier countries in reaction to the tightening of supply from Colombia. Indications suggested the overall market seemed less likely to move into balance as demand had fallen, because the level of expected production cuts did not seem to be materializing. Major miners had reported actual increases in output rather than decreases during the year. Rather than aiming to put on pressure for a price increase they appeared to be looking to increase productivity and minimize their costs while continuing to compete with shippers in the major producing countries around the world. The coking coal market remained inactive, but there were some interesting signs that traders had been attempting to inject life into the market by suggesting the spot price was rising.


By October, the Asian markets were showing mixed activity, and the holidays in China had an impact on much of the usual trade in the region. The Japanese remained the highest payers for quality Australian thermal coal on a contract basis, with Korea paying close to the Newcastle Spot Price for contract tonnage. European markets had seen some increased demand for thermal coal ahead of the winter burn, with consumers seeking new tonnage to build stockpiles during the autumn. The spot price had been firming due to the boost in demand amid a relatively tight prompt spot market. Some South African tonnage was likely to be heading towards Europe when the vessel backlog eased there if the spot price was attractive, and the buyers were bidding higher prices than those in India that month. Transport problems were delaying coal supply from Russia’s Kemerovo region over the summer months. In the wake of the hard coking coal price settlements, some quarterly contract agreements had been made for ultra low vol PCI (pulverized coal injection) coal for the current period, with modest but welcome increases for the shippers. At that time in the freight market, further substantial increases had been seen in the Panamax rate across the north Atlantic, where the US Gulf – ARA rate reached the highest since May 2012 at US$20.55/t. 


Coking coal exporters in the Asian region were hopeful that the Chinese would return to market with renewed demand following their holiday period. Trade had been relatively quiet during the previous weeks, but some price increases had been achieved in the contract market for various grades of coking coal. The talks took place amid the rising spot market which helped sellers in their negotiations after a period of weak prices. Increasing costs had led to power generating companies and domestic coal suppliers hiking the price of electricity and coal in some regions around the world in October. Increases in the price of coal had been reported in China, and the price of electricity in the United Kingdom was to rise as fuel costs and other expenses such as environmental taxes impacted the financial positions of utilities. The delivered price of coal to Europe remained at the highest levels since the start of the year due to the rise in freight rates, but Asian delivered prices were not at those earlier levels at that time.


The strategy of increasing coal production amid the low prices in the prevailing market had been continuing for Rio Tinto, as reported by the company in October. There had been some more trade of thermal coal into China following the increase in the domestic price there. The spike in the freight rate had eased, and delivered prices were becoming more attractive to the coastal consumers in southern China. A backlog of supply from Colombia had been evident in the European market, and a number of cargoes had been purchased as they became available for delivery over the following three months. The industrial issues in Colombia helped to firm up the spot price for a while, but there were signs that these had stabilized somewhat ahead of the Coaltrans conference in Berlin in late October. South African shippers had seen demand from Europe, and with improving interest from India as well as other demand in Asia, the Richards Bay spot price was maintaining its level. Capesize freight rates eased further on the major coal routes, but the Panamax rate from the US Gulf to Rotterdam firmed by 5% as vessel availability was tighter.

There were reports of some European interest in coking coal from the USA towards the end of October, with a spot Panamax cargo purchased. Freight rates continued to decrease on all the major coal routes, both in the Capesize and Panamax markets, and delivered prices for coal were easing. The surge seen in previous weeks appeared to have turned around, with significant reductions in the prices being seen on a week-by- week basis. Rates did, however, remain above the lows seen earlier in 2013.


As the year drew to a close, the thermal coal spot market in Asia firmed, with reports that Japanese, Indian, and Chinese buyers had been seeking coal. The major buyers in Korea and Taiwan were also active in the spot tender market. European spot pricing was firmer amid the continuing steady market. Uncertainty about Colombian supply in the next few months had helped firm the spot price in the European and Mediterranean markets, with Russian shippers benefiting ahead of the winter constraints, and South African shippers seeing renewed enquiries from buyers looking to secure other options in the Atlantic. US shippers were also understood to have been offering tonnage for the first half of 2014. New import taxes or an outright ban on low quality coal were expected to impact the market from 2014, with Korea and China due to introduce new policies on that. The Indonesian producers are expected to be adversely impacted more than elsewhere, while Australian shippers as well as Russian and Canadian exporters could benefit. Mass protests in Ukraine resulted from the refusal of the government to sign new trade agreements with the European Union, and rather to forge closer ties with Russia. This could have implications for the energy sector in the future, and political uncertainty is likely to continue for some time there. In the coking coal market, negotiations started on the new contract terms.


Just before the end of 2013, the thermal coal spot market in the Asian region saw quality brands being sought after ahead of the holiday period. Australian, Indonesian, and Russian shippers had been seeing enquiries. The only sector said to be seeing some weakness was the low end of the Indonesian thermal coal market with little interest from Indian buyers at the end of December. Delivered prices for quality material had risen again as the freight market maintained its position for a relatively strong end to 2013. European trade had also been more active towards the end of December, and in the Mediterranean market, the Turkish cement makers were looking for tonnage amid increasing delivered prices. The onset of the winter freeze was affecting Russian supply out of all ports including those in the Black Sea. US exporters had been seeing interest from buyers in Asia and Europe, with consumers with FGD (flue-gas desulphurization) still showing interest in high sulphur material. The year ended with mixed changes in the freight market, depending on the vessel size and route. Atlantic thermal coal spot prices saw little change compared to the level 12 months earlier, but spot prices in the Asia-Pacific region had decreased by several dollars per tonne. Initial data suggests there were increases in the volume of coal produced by some of the major miners amid the weak pricing environment in 2013. DCi

Dr Tim Jones is Director of Consultancy and Editor of the weekly publication Coal Market Intelligence which covers 11 spot markets worldwide, gives key information on the latest deals and tenders, company news, people and jobs, industrial relations, and ports, shipping, and freight rates.