IHS Markit: Carbo One 2019 exports set to fall by 34%

September 06, 2019

International coal trader Carbo One is expected to export around 50 mt of coal this year, down 34% compared with 76 mt last year due to weak European demand.

The company had previously targeted 80 mt in sales for this year, but soft demand and strong competition from natural gas which has weighed on prices led to the reduction, according to a senior company official.

The Atlantic market represents 67% of its export share and the remaining 33% is Asia Pacific. “The Asia-Pacific market has the potential to grow in the coming years,” the official said.

Carbo One also expects next year’s exports at 50 mt, flat compared with this year. This is understood to be predominantly Russian material.

European coal imports are estimated to have dropped to 80.90 mt in the first half of the year from 82.00 mt in the same period last year, according to IHS Markit analysis.

A combination of power plant closures, abundant natural gas and a rise in renewables have pushed prices to their lowest since 2016, while stockpiles at the main import terminals in Amsterdam, Rotterdam and Antwerp are hovering around 8 mt, up 5.45 mt from the average last year.

The IHS McCloskey NW Europe Steam Coal marker dipped to $47.26/t in June this year, before recovering to $56.73/t on 3 September but are still down 34% from $85.47/t on 2 January.

“Under such price conditions some suppliers may stop loss-making deliveries and be forced to leave the market,” he said, but added that he expected the market to recover further.

Carbo One supplies various grades of Russian steam coal to its customers ranging from high c.v. (6,200-6,300 kc NAR) material with total moisture of 9% max, ash 10.50% max and sulphur 0.40 max, down to high vol, low c.v. coal (5,400 kc NAR) product, as well as PCI for the steel sector.

European metallurgical coal demand has also fallen, hit by steel production cuts announced by steel makers.

“A met coal price recovery is expected to follow thermal coal but we don’t expect any improvement until next year. PCI prices could rise by the second quarter of next year,” the official said.

Australian low vol PCI material is assessed at $98.50/t by IHS Markit.

While the bulk of Carbo One’s Atlantic exports are to Europe, the company has also made inroads in the South American market.

It has emerged as a major supplier of PCI coal into Brazil.

Last year a Brazilian steelmaker signed a PCI supply agreement with Carbo One for an unspecified volume. It is understood the contract was renewed this year for another two or three years.

Demand for met coal is expected to be flat this year in Brazil due to mills undergoing maintenance. A revival in demand is possible next year if President Jair Bolsonaro keeps to his pledge to invest in infrastructure projects, the official said.

“A further escalation of trade tensions between US and China would benefit Brazilian steel,” he added.

The US imposed 25% tariffs on imported steel and 10% tariffs on imported aluminum in March 2018, on national security grounds. Exemptions were granted to Argentina, Australia, Brazil and South Korea in exchange for quotas of imported US goods.