Coal Prices Revive on Good News from China & Europe

Jakarta,- World benchmark coal prices closed back excited on Thursday trading (30/5/2024), amid the slowing of the United States (US) economy in the first quarter of 2024.

While the increase in demand from China is also one of the supports for coal to this day, where China is the largest consumer of coal in the world.

Based on data from Refinitiv on Thursday, the ICE Newcastle benchmark coal price for the June 2024 contract closed at US$ 140.25 per ton, up 0.25% from the price position last Wednesday.

Global coal prices continued their strengthening despite deteriorating sentiment after the release of the second estimate of US economic growth or gross domestic product (GDP) for the first quarter of 2024.

The Commerce Department showed the economy grew more slowly in the first quarter than previously estimated, after downward revisions to consumer spending and equipment and a key measure of inflation slowed, ahead of today's release of April 2024 PCE inflation data.

US real GDP expanded at an annualized rate of 1.3% in the first quarter, down from the initial estimate of 1.6% but slightly worse than the Dow Jones forecast of 1.2%.

A reduction in consumption, from 2.5% to 2% growth, was the main cause of the downward revision. 

With the economy slowing there is an expectation that the US central bank The Federal Reserve (The Fed) will cut interest rates.

On the other hand, there is a bit of good news in that the Port of Baltimore, the second-largest coal export hub in the US, has resumed export operations with some restrictions following the bridge collapse that halted shipments since March.

About 0.42 million tons of coal were shipped from the port last week, with similar volumes expected this week, based on Kpler vessel tracking data.

The data shows most of the coal is destined for India, although smaller volumes will also go to Turkey and Egypt.

“Ocean-going vessels began arriving around May 17 and CSX has largely returned to normal operations at the Curtis Bay coal dock,” Sheriee Bowman, a spokeswoman for CSX, owner of one of the two affected coal terminals, was quoted as saying by Montel News.

Meanwhile, China is still the savior of coal, because the demand for coal in the country is still quite high. China is the largest consumer of coal in the world.

This is because China's economic projections are expected to head in a positive direction, making higher growth in China will help boost business activity and electricity demand, which in turn boosts coal demand.

Earlier on Wednesday, the International Monetary Fund (IMF) raised its projection for China's economic growth to 5% in 2024 on Wednesday (29/5/2024). This is supported by economic data that seems to be improving lately.

The IMF revised China's economic growth and raised it from 4.6% to 5% in 2024 and 4.5% in 2025, driven by strong first quarter GDP data and recent policy measures. Core inflation is expected to pick up but remain low as output remains below its potential.

The new projections come after China stepped up its efforts to shore up an uneven recovery in the world's second-largest economy, which has struggled in the face of a prolonged property crisis and its adverse impact on investors, consumers and businesses.

Meanwhile, investors are also awaiting the release of data on China's manufacturing activity as reflected in the NBS' Manufacturing Purchasing Manager's Index (PMI) for May 2024. This data will also be monitored because it can measure how China has managed to recover its economy.

Market consensus in Trading Economics estimates that this month's manufacturing PMI is likely to rise slightly to 50.5.

It is known that according to data from the NBS, China's official manufacturing PMI increased in April to reach 50.4, signaling that China's manufacturing sector is still at the 50-point threshold that separates growth and contraction.

 Sources :  May 31.24

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