Virtue signaling as Sharm offensive continues

11 November 2022

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A lot can change in 12 months. This time last year, British Prime Minister Boris Johnson trumpeted the death knell for coal at the COP26 meeting in Glasgow, but rhetoric from this year’s COP27 in Sharm el-Sheikh has changed, almost as much as the UK’s political classes.

The talk, beyond the by now traditional virtue signaling, has moved on to reparations for countries affected by climate change. The calls to kill off coal are quieter.

Perhaps that’s unsurprising given the about-face from Europe, contemplating a winter without Russian gas and quiet mutterings in the darker corners about the wisdom of investing in gas as a transition fuel rather than pushing that cash straight into renewables while keeping a low-cost coal fleet standing ready for cloudy, windless days.

Nevertheless, one or two anti-coal ideas were rolled out by western economies aimed at making life more difficult for the sector rather than impossible.

The biggest was a United States proposal to introduce a carbon tax and use the proceeds to fund renewable initiatives in developing nations.

US climate envoy John Kerry said that the scheme would raise billions of dollars from US companies to help poorer nations develop renewable energy rather than coal, oil and gas.

The scheme is understood to be the product of consultations between the government and billionaire do-gooders including the Rockefeller Foundation and Jeff Bezos.

Little detail has been provided, although such schemes have been operating in states including California and in Europe for years; however the money raised in these goes to the exchequer rather than overseas.

"We're hearing strong interest from developing countries," Kerry said according to Axios, citing Nigeria and Chile. Nigeria is the world’s seventh-largest oil exporter, ahead of Kuwait and Norway, and has the 26th largest economy. Chile is the world’s largest copper miner and is ranked 45th globally in terms of the size of its economy.

At the launch of the initiative, called the Energy Transition Accelerator, Kerry emphasised that his carbon market would hasten the pace of closure of coal-fired power and speed renewable investment. But Kerry and the rest of the Biden administration could face an uphill battle bringing in the scheme after this week’s mid-term elections. While there are votes left to tally, it would appear likely that the Republicans have retaken the US House of Representatives, while the outcome in the Senate is too close to call.

But without the votes in the House, it’s likely the brakes would be put on the Energy Transition Accelerator.

“Sometimes you get the impression these people don’t read the news,” a coal industry veteran in the US said. “The world is short of energy and they keep yammering away about doing away with coal and replacing it with renewables. He can ask his counterparts in Europe how that works.”

The source said he’s as busy checking the continuing vote-counting in the US elections as he is selling coal. If the Democrats are able to maintain control of both houses, he said Kerry’s proposal could become a reality.

“It’s the kind of ‘Look what good people we are’ idea that ends up a cascading catastrophe.”

Another producer in the US referenced a line from former President Ronald Reagan when it came to the idea Kerry was peddling to less-developed nations as a way to a more-energized future.

”Reagan always said the nine scariest words in the English language are ‘I’m from the government and I’m here to help.’ Whichever countries he (Kerry) is talking to would do well to learn that.”

China obviously isn’t one of them.

At the same time the US and European governments expect the public to pay up for climate change through carbon pricing, China is speeding up its plans to develop coal-fired capacity.

China appears to have set 18 coal projects on the fast track last month, including starting work on four plants totaling 4.3 GW and granting approval for five projects totaling 9.8 GW, and an additional nine in the pipeline totaling 15.28 GW.

Investment in coal generation hit RMB54.7bn ($7.58bn) in the first nine months, up 48% year on year, compared to 18% growth in 2021 and declines between 2017-20. Coal-fired power capacity could increase to 1,230 GW by 2025 from 1,080 GW at end-2020, according to forecasts.

One notable feature of this year’s COP was the 25% rise in attendance from the fossil energy sector, which furnished around 600 delegates, according to the BBC, of the 35,000 or so who jetted in from around the world to lament CO2 emissions.

Also interesting was how the energy market turned on itself as one sector strives to push another under the bus ahead of the event.

There was nowhere this was more apparent than at the Future Investment Initiative event in Riyadh at the end of last month, when Gulf oil producers went on the offensive ahead of COP27.

Saudi Aramco CEO Amin Nasser said the world is currently “transitioning to coal” despite the trillions spent on renewables.

Saad Sherida al-Kaabi, the current minister of energy for Qatar and the president and CEO of QatarEnergy, the state-owned company that operates all the oil and gas activities, seconded Nasser’s thoughts.

“Many countries, particularly in Europe, which had been strong advocates of green energy and a carbon-free future, have made a sudden and sharp U-turn,” he said. “Today, coal burning is once again on the rise, reaching its highest levels since 2014.”

Coal burn is certainly on the rise as Europe takes steps from freezing this winter and tries to reduce the amount of money it pays Russia for gas in the wake of the latter’s invasion of Ukraine in February.

Nasser said, citing International Energy Agency data, that coal consumption is set to rise to around 8 bnt this year, but that would only mark a 0.7% increase from last year. Nevertheless, the IEA has said it expects coal demand to continue growing in 2023 and set a new all-time record.

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Germany coal storage full, market buying Q1, selling prompt

1 November 2022

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German coal-fired power plant stock yards are nearly full and should last until the end of the year, according to a number of coal industry participants, with buying now centered on the first quarter of 2023, while some traders in the region said their focus had switched to selling spot tonnes in the very prompt market.

At the start of the conflict between Russia and Ukraine on 24 February and in the face of threats from the Kremlin to cut off gas supplies in Europe, Germany went on a coal buying spree, and set aside shorter term decarbonization goals to reactivate coal capacity to reduce its energy dependency on Russia.

“The sector was in panic through to August and bought a lot of coal,” one trader told McCloskey at the Coaltrans conference in Athens this week. Much of that urgency was to bring in high c.v. low sulphur coal from Russian ahead of the 10 August deadline imposed by the European Union for the cessation of trade.

That rash of imports helped lift stocks at the Amsterdam-Rotterdam-Antwerp (ARA) hub to around 8.5 mt at their peak in August and drove prices to record highs above $400.00/t DES AR.

Logistics proved to be an issue over the summer as low water levels restricted the movement of coal through Europe’s inland waterways, but wetter weather has eased barging issues and power plants have also filled up.

Now with the stocking done and comfortable levels of inventory at German power plants, some companies are opting to sell in the very short term. The feeling in the industry is that there is a lot of coal available right now.

Stockholders are looking at opportunities for that material, some of which would have been bought on longer term contracts at prices well below the current spot price around $240.00/t DES AR and are looking north for markets.

At least nine ships have taken cargoes to markets in Finland and Poland from ARA terminals in the past few weeks.

Some of those ships are understood to be for Finland’s 565 MW Meri-Pori power plant that has been reopened to help support energy supplies, after Russia cut gas deliveries to the country, which agreed to join NATO in June.

Poland is also picking up supplies. The country, which banned Russian coal imports in mid-April, has seen seaborne imports rise to 11.1 mt in the year to date, up from 5.2 mt in the whole of 2021.

But local terminals are struggling to handle the increased tonnages, especially for larger ships. The country has started to re-direct seaborne shipments to neighbouring countries and at least three Handy vessels have left the ARA hub for Poland, but have landed in smaller Baltic ports in October.

It’s not just ARA where landed coal stocks are likely to be shuttled around the continent.

Big companies are bringing in Cape vessels to ports such as El Ferrol in Spain, where they blend high-ash Australian coal with low-ash, high-sulphur coal from the United States.

Once the coal is blended, it is being loaded onto smaller vessels for smaller, less congested ports – an expensive practice, with a cost of EUR12-15/t. But with Australian high-ash coal assessed at nearly $100/t cheaper FOB and freight around $18/t, there is likely to be some profit in such a scheme even when factoring in the lower energy content of the Australian coal, especially if prices push higher as the weather cools.

Currently, Germany has about 45 GW of coal-fired power capacity. Coal contributed 9% of the electricity mix in 2021, a figure that has increased to 11% only in the first nine months of this year, according to Fraunhofer data.

At the end of June, the government authorised 27 coal-fired plants to resume operations. The first plant to resume operations in early August was Mehrum, with a capacity of 690 MW.

A month ago, Germany accepted EUR450m in EU aid to reopen coal-fired power plants for electricity generation as it sought to replace Russian gas.

Of the 27 authorised plants, around a dozen are already in operation. The Heyden power plant in Petershagen (North Rhine-Westphalia) was the last to return to the grid, on 29 August. Is it expected to produce electricity until the end of April 2023. This thermal power plant, owned by Uniper, has a capacity of 875 MW, and is one of the biggest coal-fired power plants in Germany. It had been in operation since 1987.

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Transnet, unions fail to reach wage deal, prolonging S. Africa strike

11 October 2022 

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Transnet and union workers failed to reach an agreement over a wage dispute early Tuesday, prolonging a labour strike that has seriously hobbled South Africa’s ports and rail system.

Transnet will continue discussions tomorrow with the South African Transport and Allied Workers Union (SATAWU) and the United National Transport Union (UNTU), whose members represent 80% of the company’s workforce, or around 15,000 employees.

“The parties have agreed and signed on the picketing rules and picketing sites and remain willing to find a solution on the wage negotiations,” Transnet said. “The parties to the negotiations are considering alternative proposals and will reconvene on Wednesday, 12 October 2022 to take the process forward.”

The strike, now in its sixth day, has yet to impact South African export prices, as the independently run Richards Bay Coal Terminal (RBCT) continues to load vessels as normal. The McCloskey Richards Bay 6,000 kc NAR marker fell to a fresh seven-month low on Monday at $219.38/t FOB, compared to $277.67/t FOB a week ago.

Traders said prices could quickly rebound if the strike continues beyond this week and RBCT depletes its current stocks, estimated at around 4 mt on Monday. Transnet’s railings have halted into and out of RBCT due to the strike, leaving the terminal with only its coal stockpiles to load vessels.

Shipping data showed at least two vessels, carrying a total of around 250,000 t, being loaded and departing RBCT on Monday. RBCT is by far the largest export hub for South Africa’s coal, shipping around 90% of the country’s exports last year.

The workers’ strike has disrupted smaller coal shipments at the nearby Port of Richards Bay, which is owned and operated by Transnet. Shipping data showed just one 60,000 t coal vessel departing on Monday, down from the typical four to five ships a day before the strike.

While coal exporters have RBCT to keep them going in the short term, other industries are not as lucky.
“Miners and many other companies are losing billions while this goes on, with early estimates putting the costs at ZAR6bn ($330m) per day,” said Busisiwe Mavuso, CEO of Business Leadership South Africa.
“This is disastrous not only to obvious sectors linked to direct imports like the medical sector, and exports, like the mining sector, but to the entire, interconnected economy.”

Unions are demanding a 12.0-13.5% increase in pay amid a 7.6% annual inflation rate. Transnet is offering workers of different levels an increase of 3-4%, as well as an ex gratia payment of ZAR5,000 ($276) before tax.

“Embarking on a strike is not a priority to the union because we are aware of the consequences and the negative impact the strike will have on the economy of the country, however the union had no choice as the employer was not offering what the workers want,” said SATAWU.

The last industrial action of such magnitude at Transnet took place in 2010 and lasted for two weeks.

McCloskey's Newswire, part of the Global Coal Markets News and Analysis Service, delivers real-time email alerts of market-moving news to coal industry professionals – especially of interest to traders – in a world where prices and sentiment can change in minutes. Learn more and request a trial.

Reporting by Randy Fabi, rfabi@opisnet.com 

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