The latest developments in the international coal market impacting regional production and supply.
By Mark S. Kuhar
Here are some of the latest developments in today’s coal market.
According to the CNBC network, based on its last full-year results, Australian coal producer Whitehaven is not profitable. The coal producer had about A$500 million in losses last year, including impairment write-offs.
Last year, it attributed its poor performance to the high value of the Australian dollar, COVID-19, production issues and ironically, the falling price of coal. But this year, underpinning Whitehaven’s rise is the meteoric increase in stock price is the price of thermal coal, the world’s go-to fuel for energy production.
The price of the fuel shot up even faster after the war in Ukraine started, with high-grade thermal coal trading at record highs above $400 a tonne. In comparison, over the past 10 years, high-grade thermal coal has fetched between $50 and $120 a tonne.
The Ukraine crisis and the European Union’s subsequent ban on imports of Russian coal – which took effect earlier in August – has taken out a chunk of the global coal supply. It has forced many European countries to go further afield to Australia to source for supplies of the fuel, driven by greater urgency as winter looms.
China’s Yankuang Energy has ended discussions for the potential acquisition of remaining shares in its majority-owned unit Yancoal Australia, citing “recent market conditions.” In May 2022, Yankuang’s $1.8 billion bid to purchase the minority stake in the Australian coal firm was rejected. The Chinese firm had offered a price of $3.6 per share in convertible bonds to acquire 498.2 million Yancoal Australia shares that it previously didn’t own, representing a 37.74% stake.
ExxonMobil and Pertamina, the state-owned energy company for Indonesia, have signed a joint study agreement to assess the potential for large-scale implementation of lower-emissions technologies, including carbon capture and storage and hydrogen production.
The agreement builds on efforts to advance carbon capture and storage in Indonesia that have taken place since the companies signed a memorandum of understanding at COP 26 in Glasgow, Scotland. The expanded agreement will support Indonesia’s net-zero ambitions and builds on a decades-long strategic partnership between ExxonMobil and Pertamina.
The joint study agreement was signed by Pertamina President Director and Chief Executive Officer Nicke Widyawati and Irtiza Sayyed, president, ExxonMobil Indonesia. The signing was witnessed by Indonesia’s Coordinating Minister for Maritime and Investment Affairs Pak Luhut and Jack Williams, senior vice president, Exxon Mobil Corporation.
“This is another step forward for both companies, and it positions Indonesia to play a leading role in supporting the reduction of emissions from hard-to-decarbonise sectors,” said Dan Ammann, president of ExxonMobil Low Carbon Solutions. “Expansion of carbon capture and storage in Southeast Asia would support a lower carbon future. Governments, the private sector and communities will need to work hand-in-hand to make this a reality.”
ExxonMobil’s Low Carbon Solutions business is working to commercialise lower-emission technologies and support global emission-reduction efforts. It is initially focusing its carbon capture and storage efforts on point-source emissions, the process of capturing CO2 from industrial activity that would otherwise be released into the atmosphere and injecting it into deep underground geologic formations for safe, secure and permanent storage.
Carbon capture and storage is a proven technology that can enable some of the highest-emitting sectors to reduce their emissions, such as manufacturing, power generation, refining, petrochemical, steel and cement industries. Commercial-scale and broad deployment of carbon capture and storage could create a new industry, resulting in job creation and economic growth.
The business is also pursuing strategic investments in biofuels and hydrogen to bring those lower-emissions energy technologies to scale for hard-to-decarbonise sectors of the global economy, by leveraging the skills, knowledge and scale of ExxonMobil. The company has more than 30 years of experience capturing CO2 and has cumulatively captured more human-made CO2 than any other company. It has an equity share of about one-fifth of the world’s carbon capture and storage capacity at about 9 million metric tons per year.
The chief financial officer of German energy firm RWE told CNBC that it will burn more coal in the short term – but insists its plans to be carbon neutral in the future remain in place.
Michael Muller’s comments come as European countries scramble to shore up energy supplies, as the war in Ukraine continues. Russia was the biggest supplier of both petroleum oils and natural gas to the EU last year, according to Eurostat. It has significantly reduced flows of natural gas to Europe after Western nations imposed sanctions on the Kremlin as a result of its unprovoked invasion of Ukraine.
Germany – Europe’s largest economy – has decided to recommission some of its coal-fired power plants in order to compensate for its lack of Russian gas. “RWE is actively supporting the German government, or European governments, in managing the energy crisis,” Muller told CNBC’s Joumanna Bercetche. “So we’re also bringing back additional coal capacity to manage that situation.”
RWE said lignite, also known as brown coal and considered particularly bad for the environment, “remains a reliable partner to this day.” It adds that RWE Power – which focuses on lignite and nuclear power generation – extracts millions of metric tons of coal each year.
All of the above represents a hurdle for the Essen-headquartered business, which has said it wants to be carbon-neutral by the year 2040.
• South African coal prices rebounded slightly, rising above US$312/t, following the European indices growth, while Indian consumers continue to enhance imports of Russian material, supplied at a significant discount, using it instead of South African production or by mixing Russian coal 6000 with South African 4800. Some Indian power plants are testing a mix of Russian and Indonesian coal. Indian generating companies note that material from Russia with 22% to 25% volatile matter content can completely replace supplies from South Africa.
• ExxonMobil, Shell, CNOOC and Guangdong Provincial Development & Reform Commission have signed a memorandum of understanding to evaluate the potential for a world-scale carbon capture and storage project to reduce greenhouse gas emissions at the Dayawan Petrochemical Industrial Park in Huizhou, Guangdong Province, China.
• In China, spot prices for 5500 NAR at the port of Qinhuangdao slipped to US$169/t. Decrease in quotations on the Chinese market slowed down, following the growth of accidents at underground mines. Prices were also supported by the resumption of operations at several chemical plants and an increase in demand from cement producers owing to government support for infrastructure projects.
• Chinese regional authorities stated that unscheduled safety inspections will be conducted at coal mines in major mining regions, including Shanxi, Shaanxi, Inner Mongolia, Gansu and Shandong.
• Indonesia’s Ministry of Energy and Mineral Resources banned more than 40 producers from exporting coal for breaching commitments to supply the domestic market. The authorities note that the ban will be limited and will affect minor mining companies.
• Quotes of high-CV Australian coal dipped below US$397/t amid lower consumer activity in the Asia-Pacific. The results of tenders held in South Korea also indicate a downward trend.
• Australian metallurgical coal indices after a long fall kept strengthening above US$225/t, driven by increasing demand on the spot market. Additional support for prices was provided by the government’s decision not to issue a permit for construction of a new mine in Queensland because of its proximity to protected areas. The project, assuming production of 2 mio t with a further increase up to 10 mio t of coal per year, was proposed by Central Queensland Coal Proprietary Ltd.