Russian coal deliveries to Europe fell by 12% in the first half of 2022, with June shipments falling by 48% on the year.

The Newcastle 6,300 spot price will average US$327/t in 2022, up 139% from the 2021 yearly average of US$137. Coal prices will remain strong as gas prices in Europe increased after reports that the pumping capacity of Nord Stream 1 will fall from 40% to about 22% of the maximum capacity of the pipeline. AME forecasts that thermal coal prices will fall to US$270 in 2023 and US$200 in 2024 as gas prices ease and coal trade flows stabilise.

EU nations have agreed to reduce gas consumption by 15% between August 2022 and March 2023. This will increase coal-fired generation in the EU, as the region switches to other energy sources.

On the supply side, Indonesian miners are considering lowering their 2022 targets as unseasonal rains and shortage of heaving equipment hit production volumes. AME forecasts a deficit of -15Mt of thermal coal in the market in 2022, a continuation from the -12Mt deficit seen in 2021.

Global competition for coal is escalating as power generators attempt to restock inventory levels. Japan’s Nippon Steel agreed on a supply deal with Glencore for Australian thermal coal at US$375/t. The most expensive contract ever recorded between the two companies will be valid through March 2023. This agreement may be used as a benchmark price for other deals in Asia, although this will further raise the cost of electricity.  

Vietnam aims to shelve over 14GW of future coal capacity from the national power development plan, as part of its emissions reduction strategy to achieve net zero by 2050. With energy transition drastically impacting funding in coal projects in Southeast Asia, the share of coal in Vietnam’s energy mix will drop to 13% by 2045 from an estimated 31% in 2030.

Vietnam’s electricity demand has surged at a CAGR of 10% over the last five years. The country has one of the best renewable resources in Southeast Asia. Hanoi plans to double its wind power capacity with a US$13bn offshore facility developed by AES Corporation, a US energy company.

Vietnam currently has about 4GW of wind capacity, which combined with solar accounts for 27% of the total installed generation capacity in the country. The government aims to install 11.7GW by 2030 and 66GW by 2045.

Glencore has sold its 6.4% interest in Yancoal Australia in a deal worth A$422m (US$293m). The transaction involved the sale of 84.5 million shares traded at A$5 (US$3.57) each. The deal closely follows Glencore’s alleged rejection of Chinese Yankuang Energy’s offer to buy Glencore’s minority stake. Glencore’s consolidation of its coal assets will remain unaffected, as the miner did not consider the shareholding in Yancoal to be a core asset for the business.