As expected, it was a choppy week price-action wise, with rough weather in Australia threatening to shut down some export capacity. However, most commodities sold off toward the end of the week as the “O-my-God” Covid variant emerged from South Africa. The rand immediately sold off further.
Japan added to some of the early upside commodity price pressure with coal plant outages triggering increased demand for liquefied natural gas imports. China is ensuring the country’s power supply is firmly protected for winter and spring, with coal storage at plants hitting an all-time high.
Coal production is also surging with the average daily coal supply in the country at around 8.5-million tonnes. At the same time, its National Development and Reform Commission is unhappy with certain coal index prices being reported to the Zhengzhou Commodities Exchange. Probably what that means is that they don’t like the prices being reported and will take suitable action until the index providers are “compliant” once more.
Meanwhile, the volume of domestic coal being transported by road and rail in China is also hitting significant highs, with transport providers still being ordered to prioritise deliveries to power plants.
In India, where coal still accounts for 70% of power generation, Coal India is warning of more long-term structural price increases for the domestic fuel, based on rising prices for other commodity inputs such as crude oil.
Within South Africa, funders such as the Industrial Development Corporation and the Public Investment Corporation are a little more sanguine over funding coal, especially those companies that pledge to run down their mines responsibly rather than selling them. We see a real difference (and price premium) emerging between such responsible “regenerative miners” and others.