pdf (markitdigital.com)It is interesting to look at the realised...

pdf (markitdigital.com)

It is interesting to look at the realised price for ICE thermal and SSCC for WHCs Dec 2022 quarter.
Thermal average was $379/t while SSCC was $230/t.

Today, the spot market has inverted. Thermal at $226/t and SSCC at $359/t. Do we really have a supply demand rebalancing, a substantial supply increase or is the market simply juggling low CV thermal, high CV thermal and SSCC between different global suppliers?

Importer blending between the two is possible to achiever required CV values for boilers. Japan for example has, IMO, likely shifted to cheaper SSCC from the Aus market while sourcing lower quality thermal at also a much cheaper price from South America and Africa and blend as required for their high CV boilers. They have mentioned they are sourcing lower CV coal from these continents to reduce their overall input price. With recent SSCC price rise, this is the likely situation not for just Japan but also other NEWC customers.

They will be quick to realise that whichever way they move the price will move upward. With a combination of other input variables, the price should realign with the reality of supply and demand growth. China is also putting upward pressure on SSCC prices, NH winter stockpiles are high for now, but let's see what happens when they are drawn down and buying for the summer stockpile begins.

For the Mar 2022 quarter our mix was 72% thermal and 24% SSCC. Dec 2022 it shifted to 66% thermal and 7% SSCC to take advantage of higher thermal prices. There was also a vague 27% "other thermal coal" category which seems to be prevalent in the last two Dec quarters, it was also there at the same value in Dec 2021 quarter. Prior to the Dec 2021 quarter it was a relative constant in each 3-month period going back to Mar 2020 quarter. However, Sept 2022 quarter managed a great 92% thermal and 7% SSCC. It would seem that through the process of gaining higher SSCC volumes from WHCs operations there becomes more "other" thermal coal available. I am not sure of the exact caloric value of this "other" thermal coal (hoping for some enlightenment here), but I would expect it to be a bi product of the SSCC process. However, even with this "other" thermal, the average realised thermal price does not lag far behind the thermal spot price, so it may be inconsequential.

I honestly feel as if I know less about this sector now than I did two years ago when I started learning about it, despite going through thousands of pages of text on the fossil fuel and renewable industry. It's as if for every new thing I learn I become aware of two others that I know little about or that I cannot possibly know until after the fact. If I remained in ignorance, it surely would have been blissful