argus coal daily international - pv power · buying interest in lower calorific-value (cv) coals....

Argus Coal Daily International

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Coal market prices, news and analysis

CoNtENtS

European swaps extend gains 3China’s thermal coal import demand surges 5Qinhuangdao stocks dip on railway maintenance 5China’s Hebei to ban coal sales by end of June 6Gladstone exports escape March disruptions 6

Issue 17-68 | Thursday 6 April 2017

Copyright © 2017 Argus Media group

Americas

11,300 Btu GAR 2mths fob Puerto Bolivar 65.25 nc

6,000 kcal NAR 2mths fob Hampton Roads 59.83-77.99 nc

11,300 Btu GAR 2mths fob New Orleans 52.00 nc

International coal $/tEnergy Basis timing port price ±

Europe

6,000 kcal NAR 2mths cif ARA 78.27 +0.77

South Africa

6,000 kcal NAR 2mths fob Richards Bay 80.79 +1.29

5,500 kcal NAR 2mths fob Richards Bay 63.33 nc

Black Sea and Mediterranean

6,000 kcal NAR 1mth cif Marmara 83.38 nc

6,000 kcal NAR 2mths cif Iskenderun 79.50 nc

Russia

6,000 kcal NAR 2mths fob Baltic ports 67.42 nc

6,000 kcal NAR 2mths fob Vostochny 83.00 nc

5,500 kcal NAR 2mths fob Vostochny 71.75 nc

6,000 kcal NAR 2mths fob Black Sea 72.00 nc

Asia-Pacific

6,700 kcal ADB 2mths cif Japan 93.86 nc

6,700 kcal ADB 2mths cif South Korea 93.56 nc

6,000 kcal NAR 2mths fob Newcastle 82.66 nc

5,500 kcal NAR 2mths fob Newcastle 71.89 nc

5,500 kcal NAR 2mths fob Qinhuangdao domestic 100.18 nc

5,500 kcal NAR 2mths cfr south China 81.66 nc

5,500 kcal NAR 2mths cfr east India 74.80 nc

5,000 kcal GAR 2mths cfr east India 69.93 nc

4,200 kcal GAR 2mths cfr east India 53.89 nc

6,500 kcal GAR 2mths fob Indonesia 87.60 nc





South african March loadings reboundExports last month from South Africa’s Richards Bay Coal Terminal (RBCT) rose on the year, supported by increased buying interest for low grade products from India, as well as strong demand from Pakistan.

RBCT loaded 6.88mn t last month, up by 580,800t on the year and climbing by 1.48mn t from February. March’s exported volume was the highest since RBCT’s record 8mn t in November.

Increased deliveries were supported by renewed Indian buying interest in lower calorific-value (CV) coals.

India-bound shipments accounted for nearly 49pc of RBCT’s total March exports — its highest proportion since October 2016. The South African port sent 3.36mn t to India in March, down by 609,900t on the year. But Indian shipments rose by 1.43mn t from February, outpacing gains between the two months in 2016.

Volumes sent to India remained below 2mn t/month in December-February — a level unseen since March 2014 — as industrial buying and tonnage for traders’ stock-and-sale businesses slipped after the government demonetised 500 and 1,000 rupee bank notes in early November.

But the effects of demonetisation began to ease at the beginning of this year and cash became increasingly available. This coincided with a period during which South African NAR 4,800 kcal/kg coal was one of the more competitively priced grades on a delivered basis into India. In late January, around the time when March loading vessels may have been booked, the NAR 4,800 kcal/kg product was more competitive than the Indonesian GAR 4,200 kcal/kg coal and around $10/t below its South African NAR 5,500 kcal/kg counterpart — when including freight rates and energy adjusted on a NAR 5,500 kcal/kg basis.

The competitiveness of the NAR 4,800 kcal/kg coal even compelled some Indian cement manufacturers to switch from higher CV South African coals, market participants said.

pakistan ups shipmentsSouth African exports were buoyed by demand across the Indian subcontinent. Shipments destined for Pakistan rose to 996,500t last month — the highest volume since January 2014 and an increase of 559,100t from March 2016.

Licensed to: Zenny Tran, Ginga Petroleum (S) Pte Ltd

Argus Coal Daily International Issue 17-68 | Thursday 6 April 2017

Copyright © 2017 Argus Media group of 14

Argus Richards Bay spot coal assessment $/t

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Industrial buyers accounted for the lion’s share of Pakistan’s current coal demand, as imported coal-fired projects are not expected to connect to the grid until later this year. Cement deliveries were flat on the year at 3.44mn t in February, according to the most recent data from cement manufacturers association APCMA. But the outlook for cement production — with many firms using thermal coal at its kilns or captive power plants — is strong as new infrastructure projects, as part of the China Pakistan Economic Corridor, are under way.

Karachi-based Fauji Fertilizer Bin Qasim (FFBL)’s power division plans to commission a 118MW coal-fired power plant

by the end of this month to supply its own operations as well as feed around 52-60MW into the national grid.

FFBL received a Supramax vessel of South African coal on 25 March, data from Pakistan’s federal board of revenue show. The plant will require around 470,000 t/yr of GAR 4,800-6,100 kcal/kg product, it said.

South African loadings to Sri Lanka gained by 232,100t on the year to 461,400t last month — the largest volume sent to this destination since at least January 2014.

Power generation at Sri Lanka’s 855MW Puttalam coal plant — the sole operational coal plant in the country — rose to 535GWh in February, up from 486GWh in January, according to the most recent data from the Public Utilities Commission of Sri Lanka. Output during the first two months of 2017 gained by 38pc or 283GWh on the year.

Still sailing eastFurther east, RBCT sent 728,000t to South Korea in March, compared with no exports to this destination during the same month in 2016. While volumes recovered from the 553,700t shipped in February, they remained below the record 1.69mn t sent in January.

And South Korea may offer more limited export opportunities for South Africa as Korean state-owned utilities Kospo and EWP recently issued Colombia only tenders. Argus estimates similar high calorific-value (CV) South African product to be around 6pc higher than Colombian coal, on a delivered basis and including tax, which was revised to 33,000 won/t ($29.55/t) from W27,000/t on 1 April.

RBCT March exports mn t

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SwapS

European swaps extend gainsEuropean swaps pushed higher for a second consecutive session to track rises in power prices and the spot market.

API 2 swaps registered slightly lower gains, compared with the previous session, ranging from 35-60¢/t.

The prompt month and quarter contracts each rose by 60¢/t on the day to settle at $77.10/t and $77/t, respectively.

API 2 paper prices were supported by higher power prices. German base-load power prices gained with the May contract up by €0.50/MWh on the day to €32.75/MWh. And the July base-load contract settled around €33.30/MWh, up by €0.70/MWh on the day.

Increases in the spot market also buoyed prompt swaps. Argus assessed the cif Amsterdam-Rotterdam-Antwerp (ARA) index at $78.27/t, up by 77¢/t day on day. The midpoint of best bid-offer for prompt delivery rose by 75¢/t from the last session to $78.50/t. And day-on-day changes in the best June market were wider, with both best bid and offer gaining by $1/t to $77.25/t and $78.50/t, respectively.

Meanwhile, South African swaps gained most at the front of the curve, reversing yesterday’s falls.

The API 4 May swap settled at $82.95/t, up by $1.65/t day on day. And June paper prices rose by $1.60/t from the previous session to $82.35/t.

Near-curve contracts moved higher as the South African physical market gained. The midpoint of best bid-offer for May-loading gained by $1/t on the day to $80.50/t.

And June’s average best bid-offer market rose by $1.38/t on the day to $80.88/t. The daily fob Richards Bay index was assessed at $80.79/t — rising by $1.29/t from yesterday.

Prompt API 4 paper prices also gained as Australian prices rose. The Newcastle May swap increased by 65¢/t on the day to $88.65/t. In the spot market, the high calorific-value (CV) Australian coal traded twice in 25,000t cargoes at $90/t apiece for May loading.

Forward prices $/t

Timing Midpoint ±

cfr south China 5,500 API 8

May 86.00 nc

June 84.75 nc

2Q17 85.85 nc

3Q17 80.75 nc

4Q17 78.25 nc

1Q18 77.00 nc

2018 76.25 nc

Forward prices $/tTiming Buy Sell average ±

cif ARA (Rotterdam) API 2

May 76.85 77.35 77.10 +0.60

June 76.00 76.50 76.25 +0.55

2Q17 76.75 77.25 77.00 +0.60

3Q17 74.25 74.75 74.50 +0.50

4Q17 72.45 72.95 72.70 +0.40

1Q18 70.20 70.70 70.45 +0.35

2Q18 68.05 68.55 68.30 +0.35

2018 67.30 67.80 67.55 +0.35

2019 64.40 64.90 64.65 +0.35

2020 63.30 63.80 63.55 +0.35

fob Richards Bay South Africa API 4

May 82.70 83.20 82.95 +1.65

June 82.10 82.60 82.35 +1.60

2Q17 82.20 82.70 82.45 +1.35

3Q17 80.35 80.85 80.60 +1.05

4Q17 78.05 78.55 78.30 +0.65

1Q18 75.65 76.15 75.90 +0.40

2Q18 73.75 74.25 74.00 +0.25

2018 72.90 73.40 73.15 +0.30

2019 70.05 70.55 70.30 +0.35

2020 68.90 69.40 69.15 +0.35

API 2 premium to API 4

Prompt -6.10 -5.60 -5.85 -1.05

South Africa to Europe, implied freight rate

2Q17 -5.50 -5.40 -5.45 -0.75

3Q17 -6.15 -6.05 -6.10 -0.55

4Q17 -5.65 -5.55 -5.60 -0.25

1Q18 -5.50 -5.40 -5.45 -0.05

2Q18 -5.75 -5.65 -5.70 +0.10

2018 -5.65 -5.55 -5.60 +0.05

2019 -5.70 -5.60 -5.65 nc

2020 -5.65 -5.55 -5.60 nc

Forward prices $/t

Timing Midpoint ±

fob Newcastle 5,500 API 5

May 74.75 nc

June 73.50 nc

2Q17 74.60 nc

3Q17 69.50 nc

4Q17 67.00 nc

1Q18 66.00 nc

2018 65.25 nc




Shipping coStS

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Asia-Pacific freight analysisEnergy Size Freight Coal $/t

Route Basis kcal/kg ’000t $/t fob landed ±

EC Australia-Japan NAR 6,000 70 11.20 82.66 93.86 nc

EC Australia-S Korea NAR 6,000 70 10.90 82.66 93.56 nc

EC Australia-S China NAR 5,500 70 11.50 na 83.39 nc

EC Australia-EC India NAR 5,500 70 13.30 100.18 85.19 nc

Indonesia-Japan GAR 6,500 70 7.30 87.60 94.90 nc

Indonesia-Japan GAR 5,800 70 7.30 74.39 81.69 nc

Indonesia-S Korea GAR 5,800 70 7.00 63.09 81.39 nc

Indonesia-S Korea GAR 5,000 70 7.00 46.04 80.89 nc

Indonesia-S China GAR 5,800 70 6.50 31.76 70.09 nc



Indonesia-EC India GAR 4,200 70 8.50 na 54.54 nc

Indonesia-EC India GAR 3,400 70 8.50 na 40.26 nc

Dry bulk freight ratesRoute Size ’000t $/t ±

Panamax

Murmansk-Rotterdam 70 6.60 -0.05

Richards Bay-Rotterdam 70 8.50 nc

Puerto Bolivar-Rotterdam 70 10.50 nc

EC Australia-Japan 70 11.20 nc

EC Australia-S Korea 70 10.90 nc

EC Australia-S China 70 11.50 nc

EC Australia-EC India 70 13.30 nc

Indonesia-S China 70 6.50 nc

Indonesia-EC India 70 8.50 nc

Indonesia-Japan 70 7.30 nc

Indonesia-South Korea 70 7.00 nc

Capesize

Richards Bay-Rotterdam 150 7.40 -0.10

Puerto Bolivar-Rotterdam 150 8.30 nc

EC Australia-S China 150 9.70 nc

Richards Bay-S China 150 10.40 nc

Richards Bay-Krishnapatnam 150 9.10 nc




Coal Market News

China’s thermal coal import demand surgesA slower-than-expected recovery in China’s domestic production and low stockpiles are likely to bolster the country’s demand for imported coal in the weeks ahead, despite severe weather and infrastructure-related supply disruptions in Australia, Indonesia and Russia.

Tight supply has already pushed up China’s seaborne requirements sharply. The country’s coal imports in the first quarter of 2017 are expected to be around 17mn t higher on the year at roughly 65.3mn t, according to estimates based partly on vessel-tracking data by Noble Group’s head of energy coal analysis, Rodrigo Echeverri Cardozo.

And China’s imports of thermal, sub-bituminous and lignite coal — which represent the bulk of coal used for generation — are likely to amount to 43mn t in the first quarter, which would be 12.2mn t higher than the year ago period, according to January-February imports and Noble’s March projections. These largely generation-linked imports would account for around 66pc of overall coal imports.

Late last year many market participants had expected import demand to be relatively flat in the first quarter compared with the same period a year earlier. This was largely based on Beijing’s decision to allow large, efficient coal mines with good safety records to revert to producing at 330 days/yr from September after a prolonged cutback on output to 276 days/yr at all coal mines.

But total coal imports in January-February were already up by 14.03mn t on the year to 42.59mn t, of which thermal coal accounted for 28.19mn t — higher by 9.36mn t on the year. And the gains are likely to have continued last month, with initial data due next week.

With many older, inefficient mines closed, and large cuts in China’s domestic production capacity during 2016 and 2017, output did not rise as quickly as might have been expected. Safety inspections at mines during the first quarter in Shanxi, Inner Mongolia and Shaanxi provinces, and the intensification of these checks in Shanxi after some fatal accidents in March, also exacerbated the shortage of domestic coal. Mines in Shanxi that violated mining boundaries or exceeded their production capacity limits also faced strict fines or the confiscation of their profits.

Coal demand from the power sector bolstered imports in the first quarter. Chinese power plants on the whole burnt more than 300mn t of thermal coal in January-February, up by 20mn t compared with the same period last year, according to China’s coal association. And coal burn is likely to have increased in March, data from six key coastal utilities show. The utilities’ coal burn reached 654,000 t/d in March, the highest since August last year, and equivalent to around 20.27mn t over the whole month.

At the same time stockpiles were nudging all-time lows and had been heading lower through much of January and February. China’s run-of-mine stocks for thermal and metallurgical coal compiled by Noble fell to under 30mn t by 28 February, the most recent data, compared with around 50mn t and 55mn t at the same time, respectively, in 2016 and 2015.

China’s national coal output on a 30-day rolling average dropped to about 90mn t by 20 March from just under 110mn t in early January, suggesting a year-to-date rise of only 4pc compared with the same time last year.

Qinhuangdao stocks dip on railway maintenanceCoal inventories at northeast China's transshipment hub of Qinhuangdao dipped this week as the Daqin railway reduced coal transportation ahead of scheduled maintenance on the line. But inventories remained higher than last month.

The stocks at Qinhuangdao hit a two-month high of 5.26mn t on 30 March, before dropping to 5.04mn t on 5 April, according to data released by coal industry association the CCTD. The latest stocks figure was down by 170,000t or 3.3pc from a week earlier, but was still higher compared with levels of less than 5mn t during most days in March.

Daily coal inbound arrivals by rail averaged 600,000 t/d for the week ended 5 April, down by 36,000t or 5.7pc from 636,000 t/d a week earlier, even though regular maintenance only started officially on the Daqin railway line today. The railway operator reduced coal loading ahead of maintenance, resulting in inbound coal yesterday to Qinhuangdao at only 477,000t, down from a range of 537,000-695,000 t/d over the previous six days.

The Daqin railway line connects the second biggest coal-producing province of Shanxi to Qinhuangdao port in northeast China. It also takes coal from the biggest coal-

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Coal Market News

producing region of Inner Mongolia through subsidiary lines. Inbound coal by rail to Qinhuangdao may remain curtailed in the coming week as Daqin is expected to be out of operation for three to four hours each day during the 25-day maintenance period.

Power plants increased offtake from the port in preparation for pending railway maintenance, despite lower coal burn, bringing the daily average offtake to 619,000 t/d this week. This was up by 36,000t or 6.2pc on the week, outweighing inbound coal volumes.

Combined coal burn at the six key power utilities in southeast China's coastal regions — Datang, Huaneng, Zhejiang Power, Guodian, Yudean and Shanghai Power — averaged 632,000 t/d this week, down by 39,000t or 5.8pc from a week earlier. The power plants held combined stocks of 9.64mn t on 5 April, up slightly by 5,000t from a week earlier. The stocks were sufficient for 18 days use, compared with 14 days only a week earlier.

Maintenance on the Daqin line may curtail coal supplies for the rest of this month, potentially offering some support to domestic coal prices amid increasing production at the mines. Argus assessed spot NAR 5,500 kcal/kg at 691.64 yuan/t ($100.18/t) fob Qinhuangdao on 31 March, up by Yn4.04/t from the previous week.

China’s Hebei to ban coal sales by end of JuneNortheast China’s Hebei province will stop the selling of coal by the end of June ahead of a complete ban on residential use in October to reduce air pollution.

The ban, which targets households initially, is intended to support the central government's efforts to reduce air pollution in northeast China and make Hebei a "no-coal" zone from later this year.

The ban on coal burn is likely to be widened from November to include factories in 18 districts and towns in the province, which is near Beijing. New oil-fired or coal-fired power generation units cannot be built from November either, as industry will be encouraged to switch to cleaner forms of energy, according to a provincial announcement in October last year.

The Hebei provincial government also signalled that it will strictly control the number of small businesses that burn coal directly and crack down on illegal production and the sale of “poor quality” high-sulphur and high-ash coal.

The province is taking parallel steps to cut coal capacity. Hebei said earlier in March that it plans to lower its coal production capacity to less than 70mn t/yr by 2020 and to increase non-fossil energy to 10pc of overall energy consumption by 2020 to help improve air quality.

It will also close this year 13 coal mines with a total

capacity of 9.41mn t, up from its previous target. Hebei also raised its medium-term target for output cuts, aiming to close 141 mines with a total capacity of 75.64mn t over the next three to five years, up from 51.03mn t previously.

The province plans to cut the total number of mines to around 60, with a combined capacity of 50mn t, by 2020.

Gladstone exports escape March disruptionsCoal exports from Queensland’s Gladstone port in March recorded their highest level in three months at 5.71mn t compared with 5.64mn t a year earlier, with minimal impact from Cyclone Debbie that affected shipments from other Australian ports.

March exports were the highest volumes since the 7.12mn t in December 2016, according to data from the Gladstone Ports Corporation. Gladstone shipped 5.31mn t in February.

The 102mn t/yr Gladstone coal port operated at 67pc of its total capacity in March. But exports from the three coal ports in Queensland most affected by Cyclone Debbie fell by 11.7pc in March compared with a year earlier and 7.4pc against February. Exports from Hay Point, Dalrymple Bay and Abbot Point were a combined 10.56mn t in March, down from 11.95mn t in March 2016 and from 11.4mn t in February 2017, according to data from North Queensland Bulk Ports.

Gladstone was closed late last month following heavy rain in the wake of Cyclone Debbie. Coal rail haulage services to the port have been affected with the Blackwater and Moura rail networks that connect mines in the Bowen basin to Gladstone closed because of flooding.

The higher exports from Gladstone reflected increased shipments to China at 1.38mn t in March, against 952,400t in February and 415,576t in March 2016. A total of 1.71mn t was shipped to Japan in March from 2mn t in March 2016, with 1.12mn t shipped to India compared with 1.32mn t last year.

There was also a shipment of 63,000t to Germany in March, which is the first time Gladstone has shipped coal to this destination since Argus started collating Gladstone port data from 1 January 2010.

Gladstone shipped 16.25mn t of coal during January-March against 16.5mn t for the same period a year earlier.

Total coal exports from Queensland’s four largest ports were 16.24mn t in March compared with 17.62mn t in March 2016 and down from 16.71mn t in February. They exported 49.55mn t of coal during January-March from 51.1mn t for the same period a year earlier.

Indonesia’s HBa reference price rises in aprilIndonesia's thermal coal reference price rose in April, reversing three consecutive monthly declines, after physical coal prices stayed firm through most of March.




Coal Market News

The energy and mineral resources ministry has set the April HBA at $82.51/t, up by $30.19/t from a year earlier when physical coal prices were at historical lows. The HBA is also $1.01/t higher than a six-month low in March, but $3.72/t below the 2017 high of $86.23/t reached in January.

The HBA, used to calculate royalties paid to the government by mining firms, is based on coal with a calorific value of GAR 6,322 kcal/kg. There are four indexes used in the calculation, including the weekly ICI coal index that is jointly produced by Argus, as well as Australian prices.

The HBA declined for several years amid a slump in international coal prices but increased during the second half of last year to reach $101.69/t by December — the highest since May 2012 — after Chinese output cuts and rising demand in the northern hemisphere boosted demand.

But the reference price came under pressure from the start of this year amid reduced demand for Indonesian coal, after main buyer China boosted domestic production and foreign utilities built sufficient stocks for winter.

Prices of most Indonesian coal grades strengthened through March following weather-related supply disruptions in the main Kalimantan producing region. The disruption was exacerbated by a dispute over mining firms' use of a public road in the Binuang region of the province that halted shipments out of three coal-loading jetties for around six weeks from late January.

The spot price of Indonesian GAR 6,500 kcal/kg coal increased by 28¢/t through March to $88.80/t, while the price of similar quality Australian NAR 6,000 kcal/kg coal increased by $1.09/t through the month to $82.66/t.

And Australian prices look likely to strengthen even further amid disruptions to rail networks in the wake of Cyclone Debbie.

Major mines with a thermal coal production capacity of 53mn t/yr are still unable to access ports in Australia's Queensland state, potentially preventing 2.9mn t of thermal coal from reaching the seaborne market until all the rail systems come back on line.

The HBA price averaged $61.84/t in 2016, up slightly from $60.13/t a year earlier. It reached a record high of $118.40/t in 2011 when flooding in Queensland resulted in a supply crunch. The HBA has averaged $83.49/t in the first four months of 2017.

India seeks coal-fired power plant supply switch The Indian government is urging states planning large-scale power plants based on imported coal to switch their projects to domestic supplies, as state-controlled producer Coal India (CIL) boosts production and improves the quality of its output.

aNNNoUNCeMeNt

Argus Media is proposing to change the deadline for trades, bids and offers for the daily cif ARA and fob Richards Bay price assessments in the Argus Coal Daily International report to 5:00pm London time from the current 5:30pm London time. The deadline for survey submissions for the daily cif ARA and fob Richards Bay assessments will change to 5:30pm London time from the current 5:45pm London time.

The change is intended to provide more time to verify and validate all market-relevant data.

Argus Media will continue to consider fixed-price and exchange-of-futures-for-physical trades, bids and offers from voice and screen brokerages, as well as validated bilateral transactions from market participants, for inclusion in price assessments. The relevant product specifications are unchanged and can be found in the appropriate published methodology. Please click here to view the Argus Coal Daily International methodology.

Argus Media will accept comments on this change until 19 April 2017. To discuss comments on this proposal, please contact Dan Hayes at [email protected]

Formal comments should be marked as such and may be submitted by email to: [email protected]

or by post to:

Dan HayesSenior Editor – International Coal PricingArgus MediaArgus House175 St John StreetLondonEC1V 4LW

Please note, formal comments will be published after the consultation period unless confidentiality is specifically requested.

Argus Media proposes to implement this change from 2 May 2017.


http://www.argusmedia.com/~/media/files/pdfs/meth/argus_coal_dailyint.pdf?la=en



Coal Market News

Tamil Nadu in south India, which largely depends on imported coal, has agreed to shelve an ultra-mega power plant at Cheyyur using imports and will set up a project based on domestic supplies, Indian coal and power minister Piyush Goyal said. The proposed 4,000MW coal-fired power plant is backed by the state-run Power Finance Corporation.

Switching to domestic coal supplies could affect as much as 4mn t of coal imports, using a base calculation of 1mn t of coal required to produce the equivalent of 1,000MW of electricity. Certain coal grades and plant efficiency may reduce such requirements.

The coal ministry has also asked CIL to focus on improving coal quality to compete with imported grades, with it encouraging beneficiation of the fuel to reduce ash and other impurities.

CIL currently has surplus coal with 60mn t held in stocks, which can be used to substitute imports, according to the coal ministry. Coal stocks at utilities have also increased to 100mn t, adequate to meet the minimum inventory requirement of 22 days' consumption, compared with only five to six days back in October 2014, CIL said.

Imports into India during the 2016-17 fiscal year ending 31 March totalled 146.19mn t, down by 17.49mn t from the a year earlier, according to data from electronic commerce and trading firm Mjunction. The year-on-year falls were slightly softer than the fall of 18.28mn t for 2015-16 against a year earlier, but the decline reflects Delhi's resolve to slash imports of thermal coal.

India's renewable expansion outstrips thermalIndia added more renewables than thermal power capacity in the year to 31 March for the first time.

Power developers likely added around 13.8GW of renewable capacity in the country's 2016-17 financial year, outstripping conventional power additions of 10.3GW, according to projections from the power ministry.

India's total installed power capacity is 326GW, with conventional capacity accounting for 270GW or around 83pc.

Additions of renewables — including wind, solar and hydropower — nearly doubled from around 7GW a year earlier, but thermal capacity additions fell by more than half from 23GW.

Tariffs for wind and solar power have fallen to record lows, making renewables increasingly competitive with thermal fuels. The surge in additions of renewable capacity threatens future growth in imports of coal and natural gas.

Power developers likely added 6.8GW of solar capacity in 2016-17, with bids for solar-power tariffs falling to a record low of 2.97 rupees/kWh (4.6¢/kWh) earlier this year. Wind capacity additions reached a record 5.5GW, after bids in the

country's first wind power auction in February came in at Rs3.46/kWh.

India now has total installed wind power capacity of 32.4GW, overtaking Spain and behind only the China, the US and Germany.

Power generation from conventional sources increased by 4.7pc in 2016-17, while renewables output surged by 24.6pc.

India's electricity transmission capacity has increased by 36pc since March 2014, the government said.

southeast asia sees shift to coal in power mixSoutheast Asia has been burning more coal and less gas for power generation, and this is forecast to continue, Paris-based gas industry association Cedigaz said.

Gas generation accounted for around 46pc of southeast Asia’s power mix in 2010, but this share dropped to 37pc in 2015, Cedigaz secretary-general Geoffroy Hureau said today at the Gastech conference in Tokyo. Coal’s share of the region’s power mix rose to 30pc in 2015 from 25pc in 2010. Southeast Asian countries had total installed power capacity of 137GW in 2010, and 205GW in 2015.

And this shift is expected to continue. Coal’s share of southeast Asia’s power mix is predicted to overtake that of gas after 2025, Hureau said, citing data from the International Energy Agency’s World Energy Outlook 2016 report.

The two key reasons for southeast Asian countries burning incremental coal for power generation are price competitiveness and recurring gas supply shortages. Coal has been consistently cheaper than gas in southeast Asia, making it difficult for power generators to justify extensive fuel-switching from coal to gas. Infrastructure bottlenecks have also prevented regional gas supplies from being delivered to power generators efficiently and economically, pushing many countries in the region to coal, Hureau said.

But new market and environmental conditions could help support demand for gas as a generation fuel. Regional LNG prices have fallen significantly in the past few years, led by a dip in crude oil prices. LNG supplies delivered in term contracts to Asia are predominantly pegged to crude oil indexes such as Ice Brent and the Japanese Crude Cocktail (JCC). Spot LNG prices have also slipped, largely because of supply pressure from new liquefaction capacity. A total of 110mn t/yr of capacity is under construction and due to come on line in the next 3-4 years.

The fall in gas prices coincides with an increase in coal costs, which have doubled since the beginning of 2016, Hureau said.

“Recent diverging trends in gas and coal prices may alter the fuel competition and re-open the gas window.”

The COP21 agreement signed in late 2015 in Paris is also




Coal Market News

likely to increase the role of cleaner-burning gas in power generation compared with coal.

Southeast Asian countries have ratified the COP21 agreement, in which they pledge to reduce greenhouse gas emissions. Increasing environmental consciousness has led to growing local opposition to coal projects in southeast Asian countries like Thailand and Vietnam, where such projects have been delayed or even cancelled.

Southeast Asia also needs to increase gas exploration and production, and invest in pipeline infrastructure, to ensure generation firms gain access to gas supplies, Hureau said.

Derailment briefly blocks Colombian railwayHaulage was partially resumed on Colombia’s thermal coal railway Fenoco yesterday evening after a derailment blocked a two-track segment of the line for almost 28 hours, a company source said.

A train carrying coal from producer Drummond’s mines overturned about 80km south of Caribbean ports at 15:17 local time (21:17 GMT) on 4 April near the town of Santa Rosa de Lima in Magdalena province.

The derailment, which spilled 2,000t of coal, was cleared by 19:00 on 5 April, Drummond said, leaving one track operating. The cause of the incident was not immediately clear, but Drummond said it is investigating. The second line is expected to re-open later tomorrow, the producer added. Northbound and southbound trains have taken turns to use the cleared line.

Prodeco, the local unit of Switzerland-based commodities trading company Glencore, and US-based Murray Energy were also affected.

The derailment may have held up 160,950t of coal, Argus estimates based on recent export figures from Fenoco-supplied ports.

Puerto Drummond and Puerto Nuevo shipped 8.14mn t or 137,952 a day in January-February, according to data from shipping agency Deep Blue.

But the 226km Fenoco line has significant spare capacity, limiting its potential impact to vessel loadings.

Fenoco’s maximum capacity of 80.19mn t/yr or 219,700t/d suggests the line could clear the backlog within days. Fenoco expects to rail 50mn t of thermal coal this year, down from a record 54.65mn t in 2016.

Drummond’s exports decline in first quarterDrummond’s Colombian coal exports fell by 3pc in the first quarter, weighed down by declines in shipments to Europe and parts of Asia.

The Alabama-based coal producer’s exports fell to 8.1mn

metric tonnes last quarter from 8.3mn t a year earlier, according to official company figures.

Shipments to India evaporated in the first quarter — reversing what had been a key support through most of 2016 — as Colombian coal lost the economic advantage it had enjoyed most of last year. Drummond shipped 804,710t of coal to India in the first quarter, company figures show.

Recent market conditions suggest the declining trend may be changing. After holding a premium to competing Asian coals most of the first quarter, Colombian spot prices have fallen to a level that negates the shipping costs of sending coal India.

Spot delivery of Colombian NAR 6,000 kcal/kg coal would cost around $82.75/t on a landed basis in India, based on the latest Argus assessment and an estimated freight costs of around $17.50/t. By comparison, similar quality coal shipped from Australia to India would be $95.96/t, according to the latest Argus coal and freight assessments.

Drummond already may be taking advantage of this reversal of fortune. A trader said Essar Oil booked a 150,000t cargo of Drummond coal two weeks ago to ship to the port of Bedi in India in May.

And Drummond will likely increase shipments in April as disruptions from Cyclone Debbie in Australia prompt buyers to look elsewhere for supply.

International market conditions generally appeared to improve for Drummond toward the end of last quarter. March shipments rose to 2.99mn t from 2.62mn t a year earlier, propelled by increased exports to Turkey.

The company shipped 1.37mn t to Turkey last quarter, making it the primary destination for Drummond’s coal. That included 655,829t for March alone. The company shipped just 326,200t to Turkey in the first quarter of 2016.

Rising exports to Turkey partly offset other declines. Exports to Spain also were a counterbalance. Shipments there rose to 1.07mn t from 641,506t.

But Drummond’s exports to Amsterdam-Rotterdam-Antwerp terminals fell by nearly two-thirds, to 879,051t last quarter from 2.32mn t a year earlier.

Drummond ramped up output since the start of the year in an effort to replenish depleted stockpiles following robust overseas orders in 2016. Output in March rose to 2.79mn t from 2.42mn in February. Total first quarter output increased by 15pc over a year earlier to reach 7.93mn t, the firm said.

The El Descanso mine has dominated output so far this year, with production jumping to 4.62mn t in January-March from 3.23mn t a year earlier. Output from the Pribbenow mine slipped by 378,651t to 3.3mn t.



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spark spreads

spark spread calculationsSpark spreads for various thermal efficiencies are calculated from Argus outright fuel, CO2 emissions and electricity prices, and are not assessments based on actual spark-spread trades. Fuel, emissions and electricity prices are taken from the Argus European Electricity, Argus European Natural Gas, Argus Coal Daily International, Argus European Products and Argus European Emissions Markets daily reports. A selection of spark and dark spreads are published in the print report. A full range of spark and dark spreads can be ac-cessed through Argus Direct. Please contact [email protected] to arrange access.

Uk eTs and Csp adjusted spark and dark spreads £/MWhNBp 55% ara Coal 38%

Contract base load peak load base load peak load

Working day ahead 12.328 13.278 2.073 3.023

May 8.491 11.691 -1.931 1.269

June 8.234 11.834 -2.917 0.683

July 7.906 11.706 -1.020 2.780

August 7.926 11.526 - -

September 9.642 12.892 - -

October 10.952 17.052 - -

3Q17 8.491 12.041 -0.697 2.853

4Q17 9.718 15.768 4.237 10.287

1Q18 9.574 15.574 6.800 12.800

2Q18 6.741 10.541 0.231 4.031

Winter 2017 9.670 15.670 5.543 11.543

Summer 2018 6.767 10.467 - -

Winter 2018 7.431 13.881 - -

Summer 2019 6.305 10.905 - -

2018 7.886 12.856 3.179 8.149

Uk unadjusted spark spreads £/MWhNBp 49.13%

Contract base load peak load

Working day ahead 16.826 17.776

May 13.017 16.217

June 12.851 16.451

July 12.460 16.260

August 12.448 16.048

September 14.137 17.387

October 15.324 21.424

3Q17 13.015 16.565

4Q17 13.875 19.925

1Q18 13.503 19.503

2Q18 11.201 15.001

Winter 2017 13.714 19.714

Summer 2018 11.266 14.966

Winter 2018 11.495 17.945

Summer 2019 10.883 15.483

2018 12.162 17.132

UK front-month peak-load spark vs dark €/MWh

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0

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4

6

8

10

12

14

16

20 Feb 7 Mar 22 Mar 6 Apr

Gas 55% Coal 38%

UK front-month base-load spark vs dark £/MWh

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Gas 55% Coal 38%


mailto:sales%40argusmedia.com?subject=Spark%20spreads%20calculations


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spark spreads

German year-ahead adjusted spark and dark €/MWh

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-10

-8

-6

-4

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2

4

17 Jan 13 Feb 10 Mar 6 Apr

Coal 38% Gas 49.13%

German eTs adjusted spark and dark spreads €/MWhNCG 55% Gaspool 55% ara Coal 38%

Contract base load peak load base load peak load base load peak load

Working day ahead 0.422 3.522 0.877 3.977 -0.109 2.991

May 1.195 5.945 1.832 6.582 0.500 5.250

June 1.013 5.963 1.468 6.418 0.539 5.489

July 1.700 7.550 2.063 7.913 3.094 8.944

August 0.200 6.200 - - - -

September 2.818 10.418 - - - -

October 2.663 10.563 - - - -

3Q17 1.554 8.104 2.009 8.559 2.400 8.950

4Q17 1.823 11.373 2.505 12.055 5.150 14.700

1Q18 0.548 10.398 1.230 11.080 5.605 15.455

2Q18 -4.411 2.239 -4.048 2.602 -0.611 6.040

3Q18 -3.916 2.834 -3.552 3.198 na na

4Q18 -1.634 7.216 -1.225 7.625 - -

2018 -2.391 5.709 -1.936 6.164 2.436 10.536

2019 -4.327 3.723 -4.054 3.996 1.775 9.825

2020 -4.170 4.130 -4.079 4.221 2.616 10.916

German unadjusted dark spreads €/MWhara Coal 38%

Contract base load peak load

Working day ahead 4.445 7.545

May 5.077 9.827

June 5.116 10.066

July 7.671 13.521

3Q17 6.977 13.527

4Q17 9.736 19.286

1Q18 10.208 20.058

2Q18 3.993 10.643

3Q18 na na

2018 7.045 15.145

2019 6.448 14.498

2020 7.372 15.672

German front-month base-load spreads €/MWh

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-1

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NCG gas 55% ARA coal 38%

German day-ahead base-load spreads €/MWh

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-5

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5

10

15


adjusted gas 55% adjusted coal 38%

German day- vs quarter-ahead base-load darks €/MWh

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Front Quarter adjusted 36% Day ahead adjusted 36%



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spark spreads

Dutch front-month base-load spreads €/MWh

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20


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Dutch front-month peak-load spreads €/MWh

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dutch eTs adjusted spark and dark spreads €/MWhTTF 55% ara Coal 38%


Working day ahead 5.909 9.459 4.741 8.291

May 5.741 10.141 4.500 8.900

June 4.795 9.645 3.639 8.489

July 3.891 9.641 4.694 10.444

3Q17 5.095 9.745 5.350 10.000

4Q17 6.323 13.023 9.150 15.850

1Q18 4.566 12.566 9.305 17.305

2Q18 -0.116 8.434 3.140 11.690

2018 1.259 10.159 5.586 14.486

2019 -0.836 9.164 4.675 14.675

2020 -0.633 8.417 5.516 14.566

Italian eTs adjusted spark and dark spreads €/MWhpsV 55% ara Coal 38%


May 8.245 9.545 10.550 11.850

June 10.895 15.395 13.239 17.739

July 16.141 22.391 20.444 26.694

3Q17 13.795 18.345 17.550 22.100

4Q17 12.005 20.005 18.150 26.150

1Q18 11.502 19.852 19.105 27.455

2Q18 4.416 5.866 10.990 12.440

2018 8.409 14.359 15.736 21.686

2019 6.905 11.955 15.325 20.375

European front-month base-load dark €/MWh

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0

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Germany ItalyUK

Dutch day-ahead peak-load spark vs dark €/MWh

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French front-month base-load spreads €/MWh

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Coal 38% Gas 49.13%

French front-month peak-load spreads €/MWh

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Coal 38% Gas 49.13%

French eTs adjusted spark and dark spreads €/MWhara Coal 38% peg Nord 55% Trs 55%

Contract base load peak load base load peak load base load peak load

Working day ahead 4.491 5.491 5.522 6.522 5.431 6.431

May 1.800 6.200 3.041 7.441 1.768 6.168

June 1.889 7.639 2.909 8.659 - -

July 4.294 9.944 3.400 9.050 - -

3Q17 3.500 11.300 3.154 10.954 1.791 9.591

4Q17 12.850 23.900 9.523 20.573 - -

1Q18 14.755 26.655 9.607 21.507 - -

2Q18 1.090 9.690 - - - -

2018 8.136 19.036 3.219 14.119 - -

2019 8.625 20.075 - - - -

2020 10.116 22.366 - - - -

French calendar-year base-load dark €/MWh

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8

9

10

11

12

13


ETS adjusted ARA coal 38% unadjusted ARA coal 38%

French calendar-year peak-load dark €/MWh

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18

19

20

21

22

23

24

25


ETS adjusted ARA coal 38% unadjusted ARA coal 38%


Argus Coal Daily International Issue 17 - 68 | Thursday 6 April 2017

Argus Coal Daily International is published by Argus Media group

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