Atlantic markets switch out of coal but Asian demand jumps: traders

Thermal coal consumers in the Atlantic market are continuing to switch to alternative fuels while demand for coal in Asia surges amid a heat wave and other fundamentals, traders said.

"The Atlantic is exiting coal for more expensive renewables and Pacific is embracing coal, because it is abundant, reliable, and cheap relative to LNG and renewables," a US-based trader said. "The Atlantic being the EU, US, Canada, some of the South American countries including Colombia, Chile, Brazil etc."

The trader said that if countries want reliability electricity that doesn't bankrupt their economies on their route to renewables, they will need in-between fuels like coal and gas.

"Gas has its challenges...the most significant being infrastructure and transportation. Except for North America and Australia, everyone must transport in-between energy from the source of production to the destination of consumption," they added.

Additional market participants said the Pacific market was telling a completely different story, with coal seeing elevated demand.

"A Shanghai coal plant is burning 800 mt/hour of coal to meet cooling demand during a heat wave. Vietnam state-owned utility EVN said it will have a shortage of over 1 million mt of coal for thermal power plants in June and July due to rising demand. India ordered power plants using imported coal to operate at full capacity through the end of September -- three months past the previous timeline," a second US-based trader said.

In alternative parts of the Asian market, most notably South Korea, there has been an uptick in demand amid the lifting of coal power restrictions.

"The Korean government lifted the seasonal coal power restriction measure during winter, which had been a key driver in reducing coal power generation during December to March each year, as well in the second quarter," analysts at S&P Global Commodity Insights said.

European stockpiles

European coal sellers have even been sending tonnage to Asia to relieve some pressure on their multi-month high stockpiles in the Amsterdam-Rotterdam-Antwerp hub.

The Netherlands shipped 90,800 mt of thermal coal to India in June, according to data from Commodities at Sea commodity tracking software from S&P Global Commodity Insights.

Coal stockpiles at the EMO Rotterdam coal terminal measured 4.2 million mt on June 21, up 300,000 mt from the year-ago period, according to its most recent data.

ARA stockpiles hit 5.1 million mt in recent weeks, the highest level since May 2020 when they measured 5.5 million mt.