Coal Prices Rise 2 Days in a Row! Germany is now the savior

Jakarta, Coal prices continued to strengthen after slumping. This strengthening occurred along with Germany, which has not been able to completely get rid of coal use and the potential for a new European winter to occur in the first quarter of 2024. In addition, declining supply has caused India to reopen coal imports.

 Referring to Refinitiv, the ICE Newcastle coal price for the February contract closed at US$ 129.2 per ton or slightly strengthened by 1.73% on Thursday (4/1/2024). This strengthening broke the downward trend in prices for 4 consecutive days.

 Coal prices showed a strengthening of two consecutive trading days. This strengthening makes coal prices closer to the psychological level of US $ 130 per ton.

 The strengthening of prices was supported by a projected increase in demand from Germany. Coal use in Germany does fall in 2023 due to a move to reduce greenhouse emissions by 65% by 2030 to 1990 levels and a move to become carbon neutral by 2045.

 However, the decline is relatively stagnant and not very deep. Part of Germany's success in limiting coal use is due to the country's slow winter. Demand for energy is not as strong by the end of 2023 as the winter is projected to be more moderate and "mild" than in previous years.

 This sentiment makes it likely that the European winter will only be felt in the first quarter of 2024, so demand for space heating could potentially strengthen, leading to higher energy prices.

Speaking of European energy, it cannot be separated from the sentiment of natural gas prices as its main energy commodity. European natural gas prices EU Dutch TTF (EUR) strengthened 1.88% to 33.41 euros per mega-watt hour (MWh) in yesterday's trading.

 The price increase also occurred along with the scarcity of Indian coal, which prompted the formation of a coal consortium with state-owned companies to facilitate imports. This action occurred as a step to anticipate reduced supply and high coal prices.

 According to The Hindu, the consortium of government-backed companies will facilitate import activities by reaching out to suppliers in various countries, negotiating prices and other import deal terms, and ultimately selling imported raw materials to local factories, the source said.

The reopening of import taps from India as one of the largest coal consuming countries is also the cause of price strengthening. Previously, India recorded a continuous decline in coal imports due to high supply. However, as usage continues to increase, India's supply is running low, requiring it to re-import black sand.

Sources : CNBC Indonesia- Jan 05.24

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