A peek at the movement of coal prices after being hit by bad news

REUTERS/Valentyn Ogirenko

Jakarta – The benchmark coal commodity price was observed to be still strengthening this week, although it was corrected on a daily basis this week in the majority.


Throughout this week, the reference coal price on the ICE Newcastle (Australia) market for the September 2022 contract was still up 0.28% point-to-point (ptp).


However, on Friday (26/8/2022) trading this weekend, the benchmark coal price was observed to have fallen slightly by 0.02% to the position of US$ 417.4/ton.


On a daily basis, coal prices tend to fluctuate, where on Monday trading earlier this week, coal prices were observed to strengthen. But in trading Tuesday and Wednesday, coal turned lower.


Then on Thursday, coal bounced back and rose more than 1%. However, on the trading weekend, Friday, coal prices were sluggish again.


Despite fluctuating, the price of coal is still in the range of US$ 400/ton this week. There is a little less encouraging news that also affects the movement of coal prices, namely the news from China.


Temporary calculations from customs show that Panda’s coal imports in July 2022 were 23.52 million tons (including lignite). Down 22.07% compared to the same period the previous year (year-on-year/yoy).


This cannot be separated from China’s deteriorating economy due to a zero-tolerance policy towards the corona virus pandemic (Coronavirus Disease-2019/Covid-19). President Xi Jinping’s government is not kidding. As soon as there is a cluster of transmission, immediately quarantine the area (lockdown).


This policy makes it difficult for the Chinese economy to move. As a result, various economic indicators have deteriorated.


In July 2022, retail sales grew 2.7% yoy. Slowing down compared to the previous month’s 3.1% yoy growth and far below market expectations that forecast growth at 5% yoy.


Then investment in fixed assets in January-July 2022 was recorded at CNY 32 trillion, growing 5.7% yoy. Although still growing, it slowed down compared to January-June 2022 which grew 6.1%.


Then industrial production in July 2022 grew 3.8% yoy. Slowed down compared to the previous month which was 3.9% yoy and quite far below market expectations which forecast 4.6% growth.


On the other hand, the war between Russia and Ukraine had an impact on supply disruptions, causing gas prices to soar.


With high gas prices, many European countries have again decided to reactivate their coal power plants.


Therefore, the demand for coal in Europe is still quite high and the price remains in the range of US$ 400/ton.