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Tight supply driving up spot prices for met coal shipments

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Tight supply driving up spot prices for met coal shipments

Supply disruptions are driving some European steel mills to search desperately for metallurgical coal shipments.

According to Hellenic Shipping News, the tight supply is pushing some coal buyers to book Australian cargoes at $260 per tonne f.o.b. for premium hard low-volatile coal for January and February.

Offers have risen as high as $288 per tonne f.o.b. Australia while bids are around $240 per tonne for premium mid-volatile cargoes on globalCOAL, a trading platform.

Causes of this tightness include supply disruptions in Poland, widespread immediate availability and perceived logistical hurdles in the U.S.

In November, a coal executive noted that Baltimore terminals were experiencing tightness in shipping out Northern Appalachia coal. The bottleneck was forcing some producers to ship through Gulf Coast terminals.

Port capacity and the ability of coal producers to reach terminals has become an increasing concern in both the U.S. East and West.

Europe generally favors shipments from Poland, Russia or the U.S. due to the distance and shipping time of Australian coal, but the tight market is allowing Australian sellers to charge higher prices.

Poland's supply disruptions are expected to be fixed soon, but U.S. and Australian supply problems could continue through January and potentially worsen in Australia due to wet weather conditions caused by La Nina and the possibility of union action.

The Polish government recently asked coal suppliers to prioritize sending shipments to local power plants.

Exports from Virginia's Hampton Roads port facilities surged in November, jumping 72.4% year over year. Some industry analysts have predicted that the strong export market will slow down in the second half of 2018.