NE Asia favours coal burn amid cold and gas strength
Colder weather across northeast Asia, combined with coal export disruptions in Indonesia, continued to support South Korea-delivered coal prices this week.
Argus assessed NAR 5,800 kcal/kg cfr South Korea at $187.29/t, up by $14.18/t on the week.
Coal shipment delays caused by the export ban in Indonesia prompted South Korean buyers to resume buying activities earlier than expected.
State-owned Korea South-East Power (Koen) procured 400,000t of NAR 5,800 kcal/kg Russian coal at a $1.30/t premium to GC indices, which requires one cargo to be shipped quarterly in January-September, according to sources. The coal should have a sulphur content of 0.4pc and 17pc ash.
Colder weather, combined with record-high domestic LNG prices in South Korea, have boosted demand for coal burn so far this month, tightening supply-demand fundamentals. The Korea Metrological Agency issued cold wave warnings this week, with temperatures in Seoul falling as low as minus 11.3°C on 12 January, according to data provided by the agency. A sudden drop in temperatures boosted the country's power demand, with daily peak demand remaining well above the 2016-20 seasonal range (see chart).
Generation economics in South Korea favour coal burn based on state-incumbent Kogas' January power-sector tariff, which means any growth in thermal generation is likely to lift coal burn, with the government allowing flexibility to ramp up output under its winter restriction programme.
Koen initially planned to take its 500MW Samcheonpo units 5 and 6 off for the whole seasonal restriction period in December-March but brought unit 5 on line on 3 January. The restriction on unit 6 is scheduled to end on 31 January, according to the latest plant maintenance schedule published by the Korea Power Exchange (KPX).
State-owned Kepco utilities' combined coal availability is now scheduled to average 27.8GW this month, compared with 26.9GW and 21.2GW coal-fired output a year earlier.
Assuming a flat load factor year on year, Kepco's coal-fired output may increase to 22GW this month, according to Argus analysis.
Growth in coal availability comes despite firmer nuclear availability this year. South Korea's nuclear availability is scheduled to average 21.1GW in January, which could result in year-on-year growth of more than 3GW in nuclear output, according to Argus analysis.
Tighter power fundamentals support thermal margins in Japan
Unplanned outages across Japan's thermal generation units and weaker solar output sent power prices higher this week, further supporting margins for coal generators.
A series of oil, gas and coal-fired units have been shut since the end of last week due to technical issues, including J-Power's 700MW Takehara coal unit 3, Nakoso IGCC Power's 525MW coal unit and Jera's 1GW Hekinan coal unit 5. Lower thermal output came despite weaker solar output in Japan amid fewer daylight hours, while overall power demand increased by 13pc on the week due to colder weather.
Tighter power fundamentals lifted Japan Electric Power Exchange's (Jepx) system-wide average day-ahead power prices to ¥21.72/kWh ($193/MWh) on 8-14 January, up by 13.7pc from a week earlier.
Stronger power prices continued to improve margins for thermal generators, with the clean-dark-spread for a 44pc efficient coal unit averaging ¥12,855/MWh ($112.99/MWh) on 7-13 January, up by 17pc on the week, based on Argus spot coal and freight assessments and Jepx day-ahead system prices.
Clean-spark-spreads (CSS) for gas units running on spot LNG also turned positive, with theoretical margins for a 58pc efficient gas unit averaging ¥1,675/MWh, compared with the previous week's CSS of minus ¥254/MWh, based on Argus' northeast Asia des spot LNG prices.
Temperatures in Japan are forecast to remain below the seasonal norm for most days during the next fortnight by as much as 2.47°C, according to Speedwell weather data.
Related news posts
Indonesia’s MBAP sets lower coal output target for 2024
Indonesia’s MBAP sets lower coal output target for 2024
Manila, 6 May (Argus) — Indonesian coal producer Mitrabara Adiperdana (MBAP) has set a lower output target of 2.01mn t for 2024, to focus on developing its mining infrastructure. MBAP plans to improve its mining infrastructure to prepare for higher output in the next two years. It has earmarked $57.8mn for its capital expenditure this year, 49pc of which will be used for infrastructure development. This investment will allow MBAP to increase its output to 2.45mn t/yr in 2025-26, in line with its approved RKAB work plans. The firm aims to produce 2.01mn t in 2024, down by nearly 4pc from its 2023 output. The Indonesian Ministry of Energy and Mineral Resources (ESDM) has approved MBAP's target. But MBAP hopes to sell 2.3mn t of coal in 2024, up from 2.13mn t a year earlier, with sales including deliveries by its coal trading arm. Exports accounted for 73pc of the firm's total sales in 2023 and is expected to remain steady at 72-75pc this year. South Korea is expected to remain MBAP's largest market, with the country accounting for 29pc of total sales in 2023. But sales to China, which were at 18pc last year, are expected to increase this year. By Antonio delos Reyes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
India’s Adani Power raises imported coal use in Jan-Mar
India’s Adani Power raises imported coal use in Jan-Mar
Singapore, 6 May (Argus) — India's leading private sector utility Adani Power more than doubled its use of imported thermal coal during January-March and in the April 2023-March 2024 fiscal year to meet rising power demand. The Bombay Stock Exchange-listed firm used 5.19mn t of imported coal over January-March, more than twice that of 1.99mn t a year earlier. Domestic coal burn also rose by nearly 18pc on the year to 8.83mn t during January-March, following higher availability of local fuel and increased dispatches to utilities. Adani Power consumed 19.44mn t of imported coal over India's April 2023-March 2024 fiscal year. This was also more than double that of 7.66mn t in 2022-23. Its domestic coal burn increased by 10pc on the year to 31.72mn t in 2023-24. Higher imports came on the back of a sharp drop in seaborne prices. The Argus -assessed Indonesian GAR 4,200 kcal/kg coal averaged $57.88/t fob Kalimantan over April 2023-March 2024, down by over 31pc from an average of $84.45/t in the year earlier. The company's fuel cost stood at 3.33 rupees/kWh sold (0.04¢/kWh sold) in January-March, down from Rs5.30/kWh sold a year earlier because of lower blended fuel costs, following a decline in seaborne coal prices. Fuel cost for 2023-24 stood at Rs3.59/kWh compared with Rs4.78/kWh in the previous year. Lower imported coal prices also boosted power offtake under imported coal-based power purchase agreements. The company sold 22.13bn units of electricity in January-March, up significantly from 14.25bn units sold a year earlier. It sold 79.27bn units in 2023-24, up from 53.39bn units in the year earlier. Higher volumes during January-March and the fiscal year were driven by its Mundra, Udupi, Raipur, and Mahan plants — apart from the incremental contribution of the Godda unit — which were commissioned in April 2023. Domestic power sales volumes were driven by growing power demand across the country, the company said. Utility demand could continue to support imports by utilities and lift overall Indian demand for seaborne coal. India imported 14.27mn t of thermal coal in March, up by 8pc from 13.2mn t a year earlier, according to shipping broker Interocean data. Thermal power expansion plans Adani Power operates 15.25GW of thermal generation capacity in the Gujarat and Maharashtra states of west India, Madhya Pradesh and Chhattisgarh in central India, Rajasthan in north India, Karnataka in south India and Jharkhand in eastern India. The firm is eyeing a capacity of more than 24GW by 2029. It is undertaking a brownfield thermal capacity expansion of 1.6GW at its 1.2GW Mahan power project in Madhya Pradesh. It has started developing a 1.6GW expansion at its existing 600MW unit in Chhattisgarh. Adani Power has also emerged as the frontrunner to acquire thermal generation capacity and an under-construction project from domestic debt-ridden Lanco Amarkantak Power. Lanco owned and operated a 600MW thermal power plant in central India's Chhattisgarh state and was planning 1.32GW of generating capacity under the second phase of the project. Adani is in the process of acquiring a 1.2GW debt-ridden thermal power project in south India's Tamil Nadu state. Plant operator Coastal Energen is also having a corporate resolution insolvency process. It is evaluating an organic expansion of 1.6GW, besides considering other inorganic acquisition opportunities, to meet strong demand for thermal power in the coming years, the company said. By Ajay Modi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Transnet ramps up coal trains in test drive
Transnet ramps up coal trains in test drive
Cape Town, 2 May (Argus) — Transnet Freight Rail (TFR) has increased the number of trains serving the North Corridor, along which most of the coal volumes exported via the port of Richards Bay, in KwaZulu-Natal, are transported. As part of a test trial, trains serving the coal line rose to 28 per week from 21 per week previously, supported by more locomotives. As a result, since 31 March some 106,000 t have been moved from road to rail. In the process, around 3,100 truckloads were transported by train and 6,200 truck movements were eliminated. The test initiative forms part of Transnet's recovery plan and a commitment made to the City of uMhlathuze and other stakeholders during a collaborative meeting on truck congestion at Richards Bay in November. The main objective was to reduce truck loads and migrate volume from road to rail. An estimated 1,200 trucks a day call at Richards Bay, with 1mn t/month of thermal coal exported from the multipurpose and dry bulk terminals. A coal truck can delivery 34t on average, while a train wagon can carry 91t. The local uMhlathuze municipality, which hosts the Richards Bay terminals, wants to impose a R30/t fee on trucks delivering coal to the port to alleviate congestion and recoup losses associated with damage to roads. Prior to the test run, Transnet approached all customers who were transporting cargoes to the port of Richards Bay by truck. The test was also aimed at enabling Transnet and potential rail customers to assess train loading capabilities and the rail friendliness of their cargo. The test focused on assessing: siding capabilities and readiness; cargo suitability for rail loading; status of the network; train handling times; and train turnaround times. The initiative was offered to customers under the clear condition that it does not constitute a long-term commitment as there are structured processes that need to be followed for rail capacity to be allocated. By Elaine Mills Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Canadian rail workers vote to launch strike: Correction
Canadian rail workers vote to launch strike: Correction
Corrects movement of grain loadings from a year earlier in final paragraph. Washington, 2 May (Argus) — Workers at the two major Canadian railroads could go on strike as soon as 22 May now that members of the Teamsters Canada Rail Conference (TCRC) have authorized a strike, potentially causing widespread disruption to shipments of commodities such as crude, coal and grain. A strike could disrupt rail traffic not only in Canada but also in the US and Mexico because trains would not be able to leave, nor could shipments enter into Canada. This labor action could be far more impactful than recent strikes because it would affect Canadian National (CN) and Canadian Pacific Kansas City (CPKC) at the same time. Union members at Canadian railroads have gone on strike individually in the past, which has left one of the two carriers to continue operating and handle some of their competitor's freight. But TCRC members completed a vote yesterday about whether to initiate a strike action at each carrier. The union represents about 9,300 workers employed at the two railroads. Roughly 98pc of union members that participated voted in favor of a strike beginning as early as 22 May, the union said. The union said talks are at an impasse. "After six months of negotiations with both companies, we are no closer to reaching a settlement than when we first began, TCRC president Paul Boucher said. Boucher warned that "a simultaneous work stoppage at both CN and CPKC would disrupt supply chains on a scale Canada has likely never experienced." He added that the union does not want to provoke a rail crisis and wants to avoid a work stoppage. The union has argued that the railroads' proposals would harm safety practices. It has also sought an improved work-life balance. But CN and CPKC said the union continues to reject their proposals. CPKC "is committed to negotiating in good faith and responding to our employees' desire for higher pay and improved work-life balance, while respecting the best interests of all our railroaders, their families, our customers, and the North American economy." CN said it wants a contract that addresses the work life balance and productivity, benefiting the company and employees. But even when CN "proposed a solution that would not touch duty-rest rules, the union has rejected it," the railroad said. Canadian commodity volume has fallen this year with only rail shipments of chemicals, petroleum and petroleum products, and non-metallic minerals rising, Association of American Railroads (AAR) data show. Volume data includes cars loaded in the US by Canadian carriers. Coal traffic dropped by 11pc during the 17 weeks ended on 27 April compared with a year earlier, AAR data show. Loadings of motor vehicles and parts have fallen by 5.2pc. CN and CPKC grain loadings fell by 4.3pc from a year earlier, while shipment of farm products and food fell by 9.3pc. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more