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Coal slowly slides down, but defends 200-day average

Mild weather and higher production are capping the price of coal. Why is it and what can happen this year with the commodity?

Since its high in November, the price of Indian coal has gradually declined. This is perhaps due to this year’s mild winter. Nonetheless, the long-term upward trend persists.

Chinese imports ready to begin

According to merchants and ship tracking data, China will receive at least two shipments of Australian coal in early February, the first since an unofficial ban on imports in effect since 2020 was removed this month.

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The bulk vessel Magic Eclipse was loaded with approximately 72,000 tonnes of thermal coal at Hay Point, Australia, on January 23rd, according to Refinitiv and Kpler ship tracking data. The shipment is scheduled to arrive in the southern Chinese city of Zhanjiang in Guangdong province the following week.

According to a broker with knowledge of the transaction and ship tracking data, the shipment was purchased by China’s largest steel producer, Baowu Group.

Indonesia to ramp up production

The Energy and Mineral Resources Minister Arifin Tasrif said on Monday that Indonesia aims to produce 695 million tonnes of coal this year and expects exports of 518 million tonnes, a quantity that would represent historic deliveries out of the nation. According to him, in 2022, Indonesia extracted 687 million tonnes of coal and exported 494 million tonnes.

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Despite a restriction on exports at the beginning of the year, which forced some miners to hold back production, and torrential rains that interrupted operations, production exceeded the target of 663 million tonnes last year. Indonesia’s exports to India, South Korea, Taiwan, and the Philippines increased in 2022, but shipments to its largest market, China, decreased.

Bull market remains intact

Recently, the price of Indian coal has approached the 200-day moving average at 213 points. The upward trend is maintained as long as coal is beyond it. Alternatively, a new bear market may begin if the price falls below this level, pushing the price below 200 points.

Bulls will aim for last week’s highs of 230, and if significant momentum develops, closing the bearish gap between 240 and 250 in November might also interest the bulls.

coal

Coal futures 1D chart, source: tradingview.com, author’s analysis

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.

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