(Montel) Combined European and Mediterranean thermal coal imports could plunge 40% to a record low of 42.8m tonnes this year, amid poor generation demand, the director of consultancy Perret Associates said on Tuesday.
The total would be 30m tonnes down on the year and less than a third of the import volume recorded just half a decade ago, Guillaume Perret told Montel.
The estimates encompass European, north African and Turkish deliveries.
Perret attributed the decline in part to persistently low gas prices and an elevated carbon market.
“[This has meant] the clean dark spreads have remained heavily negative and much lower than the clean spark spreads even for baseload generation,” he said.
Indeed, the July clean dark spread – the profit margin for burning coal to produce power, including the cost of carbon – for a German power plant of 38% efficiency was pegged last at EUR -5.40/MWh, according to Montel data.
But the gas market’s equivalent clean spark spread was at EUR 11.70/MWh, for a 50% efficiency plant.
At the same time, a drop in total power demand as a result of the Covid-19 pandemic had played a role in eroding coal demand, as had “robust” wind and solar generation, he said.
Murmansk issues
Meanwhile, Perret said disruptions to Russian exports via the port of Murmansk – following a bridge collapse on the rail line to the key export hub last week – could equate to a 3-4m tonnes reduction in supply to Europe and the Mediterranean region for the remainder of the year.
“[But] the potential loss could be relatively easily replaced by additional supply from other Russian exporters, Colombian material and healthy stocks in northwest Europe,” he said.
Stocks at four main northwest European coal import terminals were seen last at 5.84m tonnes.
In the wake of the developments, the Global Coal Des ARA physical coal index has surged nearly 30% on the week to a latest assessment of USD 47.75/t.
“The recent increase in spot Des ARA prices and the decrease in the average cost of production for most coal exporting companies since the beginning of the year, means that some Russian and Colombian mines – that were just breaking even or even loss making in January-February – are now gradually back in the money,” Perret said.
The estimates encompass European, north African and Turkish deliveries.
Perret attributed the decline in part to persistently low gas prices and an elevated carbon market.
“[This has meant] the clean dark spreads have remained heavily negative and much lower than the clean spark spreads even for baseload generation,” he said.
Indeed, the July clean dark spread – the profit margin for burning coal to produce power, including the cost of carbon – for a German power plant of 38% efficiency was pegged last at EUR -5.40/MWh, according to Montel data.
But the gas market’s equivalent clean spark spread was at EUR 11.70/MWh, for a 50% efficiency plant.
At the same time, a drop in total power demand as a result of the Covid-19 pandemic had played a role in eroding coal demand, as had “robust” wind and solar generation, he said.
Murmansk issues
Meanwhile, Perret said disruptions to Russian exports via the port of Murmansk – following a bridge collapse on the rail line to the key export hub last week – could equate to a 3-4m tonnes reduction in supply to Europe and the Mediterranean region for the remainder of the year.
“[But] the potential loss could be relatively easily replaced by additional supply from other Russian exporters, Colombian material and healthy stocks in northwest Europe,” he said.
Stocks at four main northwest European coal import terminals were seen last at 5.84m tonnes.
In the wake of the developments, the Global Coal Des ARA physical coal index has surged nearly 30% on the week to a latest assessment of USD 47.75/t.
“The recent increase in spot Des ARA prices and the decrease in the average cost of production for most coal exporting companies since the beginning of the year, means that some Russian and Colombian mines – that were just breaking even or even loss making in January-February – are now gradually back in the money,” Perret said.
