Coal prices in Asia fell to their lowest level in three years

Coal prices for power plants in Asia have fallen to their lowest level in three years as demand in India and China, the two largest coal consumers, has fallen.

S& P data show that the benchmark price of Australian marine sports coal has fallen 44% to $61/ton since soaring to $120/ton last summer. Analysts said that the decline in coal prices was mainly due to the slowdown in China's electricity demand growth and adequate fuel supply. China is the world's largest coal consumer. At present, coal is facing increasingly fierce competition from cleaner, renewable energy sources such as wind energy and solar energy, as well as cheap natural gas.

Weak coal prices may affect the revenue of large coal companies such as Glencore, Anglo American and BHP Billiton. Glencore's share price has fallen 20% this year. Nearly a fifth of the company's revenue comes from power coal. Michelle Liu, an analyst at the British Commodity Research Institute (CRU), a London consultancy, said that China's demand for coal had weakened because of a slowdown in industries that accounted for about 70% of China's electricity demand.

"Structural economic changes and economic slowdown caused by trade wars are having a significant negative impact on the power coal market." She said.

According to official statistics of China, in the first half of this year, China's industrial electricity consumption increased by 3.1%, which was significantly lower than 7.6% in the first half of 2018.

Although China's national power generation increased by 3% in the first seven months of this year, coal-fired thermal power generation is basically the same as last year due to the strong growth of hydropower and nuclear power generation.

Kash Kamal, an analyst at BMOCapital Markets in Montreal, said that the Chinese authorities were also focusing on curbing pollution as they approached the 70th anniversary of the founding of the People's Republic in October, further squeezing coal demand.

He said that domestic demand had been weakened by seasonal factors, while the Blue Sky Defense Plan had further limited coal prices.

The weak price of power coal this year was initially caused by the excessive supply of cheap natural gas in Europe, which led to the shift of power companies to use natural gas in winter and the shift of coal suppliers to Asian markets.

However, Michelle Liu said that while China's demand has weakened, India's demand has also declined, because India is traditionally in a monsoon season with weak coal demand. Analysts said that the next big test of market sentiment will come in September, when Japanese power companies will negotiate with Australian coal companies to finalize new supply contracts for high-quality power coal, and the negotiated contract price will become the price benchmark for Asian power coal.