Coal Market Moves : China's Wholesale Coal Livestreams and Berlin's Water Scarcity

The global coal market is experiencing a significant downturn, triggering a series of interconnected impacts on various industries and regions worldwide. From the rise of wholesale coal livestreams in China to concerns over water scarcity in Berlin, and even influencing nickel production costs, the effects of falling coal prices are far-reaching. In this article, we will delve into these diverse aspects and their implications, shedding light on the intricate relationship between coal prices, water resources, and global markets.

1. Wholesale Coal Livestreams in China:

In China, the phenomenon of livestreaming has taken the retail industry by storm, and now it seems to be making its way into the wholesale coal market as well. On popular retail livestreaming platforms, such as Douyin, glamorous hosts have been seen selling a wide range of products, including truckloads of sulphurous coal. This innovative approach comes as coal inventories in China's ports and power plants have reached record highs due to reduced demand from utilities and steel mills. As a result, some coal miners are exploring new avenues to reach potential buyers.

One notable example is Huaze Coal Industry, which recently conducted a livestream featuring a young woman dressed in a blue hardhat and mining boilersuit. Holding a lump of coal against the backdrop of a coal warehouse, she advertised powdered coal with an energy content of 5,500 kcal directly from the mine in Shanxi province. The coal was priced at 570-600 yuan ($79.55-$83.73) per metric ton, with a minimum shipment size of 30 to 35 tons targeting wholesale industrial buyers.

While wholesaling of hard commodities on livestreaming platforms is not entirely new in China, it appears to be gaining traction in the coal industry. Platforms like Douyin have witnessed an increase in the number of coal-related livestream events. For example, Huaze Coal, Guohai Daily Coal Price, and Jixing Coal, three of the most active coal channels on Douyin, have collectively hosted 164 online events in the current quarter, compared to 120 events in the previous quarter and 107 events in the fourth quarter of 2022.

These livestreaming shows can last for over two hours, attracting significant viewer engagement and comments. However, it remains unclear how much revenue these events generate for the coal companies involved. Despite the tongue-in-cheek nature of many viewer comments, the livestreaming approach represents a creative effort by coal miners to tap into new markets and find buyers for their surplus coal.

2. Water Scarcity Concerns in Berlin:

Berlin, the capital city of Germany, is facing a growing concern over water scarcity, particularly during hot and dry summer days. The city relies on the Spree River as a critical water source, but the country's exit from coal mining has led to potential water shortages. With the end of lignite mining in nearby regions, the groundwater previously pumped out for coal extraction will no longer feed the Spree River. Additionally, the flooding of old mines to create man-made lakes further depletes the water resources.

A recent study conducted by the German Environment Agency reveals that the Spree River could experience a significant decrease in water availability during dry summer months, ranging from 50% to 75%. Dirk Messner, the president of the agency, emphasizes the seriousness of the situation, highlighting that a majority of Berlin's drinking water comes from the Spree River.

Berlin's water scarcity issue is further compounded by the city's ecosystem and delicate balance. For over a century, water from lignite mines has supported the marshy Spreewald, a UNESCO-protected biosphere. However, with the end of coal and lignite usage in Germany by 2030, the region will become more dependent on rainfall for water supply. Additionally, measures to prevent erosion and landslides in open-pit mines result in further water resource absorption.

To address the water scarcity challenge, Berlin's legislature is developing a "master plan" that includes strategies for reducing demand, especially during peak times, and fostering closer coordination with neighboring states. The city is investing in upgrading wastewater treatment plants and exploring innovative solutions such as purifying treated sewage for alternative use. However, current national legislation prohibits pumping treated wastewater to the city's ponds, which are currently under severe stress due to water scarcity.

3. Ripple Effects of Climate Change:

The global coal market is experiencing significant shifts in response to changing demand patterns, environmental concerns, and the transition to cleaner energy sources.
Thermal coal prices have sharply declined, dropping over 60% to near a two-year low. The decline is attributed to improved supplies and normalizing market conditions. The World Bank's commodities outlook predicts that average annual coal prices will decrease in 2023 compared to the previous year, but they are expected to remain above the five-year average.
The decline in coal prices is particularly notable in the thermal coal segment used for electricity generation. The prices of coking or metallurgical coal, utilized in steel production, are expected to ease at a slower pace.
Short-term demand for coal may experience fluctuations.
Long-term projections indicate a gradual decline in thermal and metallurgical coal prices and demand.

4. Global Coal Market Trends and Outlook:

The drop in coal prices has implications beyond the coal industry itself. One such impact is the potential reduction in nickel production costs. Publicly listed miner PT Merdeka Copper Gold anticipates a slide in nickel production costs as coal prices decrease. Coal plays a significant role in providing electricity for the rotary kiln electric furnaces (RKEF) used in nickel extraction from ore. The decline in coal prices is expected to alleviate costs associated with electricity generation, thereby improving profitability for companies engaged in nickel production.

The lower cost of coal as a major input component in the production process has a cascading effect on nickel production costs. It eases pressure from high nickel ore costs, which form a substantial portion of the production cost structure. This trend is expected to persist for some time, bringing positive implications for the nickel industry and its profitability.

5. Impact on Nickel Production Costs:

The drop in coal prices has implications beyond the coal industry itself. One such impact is the potential reduction in nickel production costs. Publicly listed miner PT Merdeka Copper Gold anticipates a slide in nickel production costs as coal prices decrease. Coal plays a significant role in providing electricity for the rotary kiln electric furnaces (RKEF) used in nickel extraction from ore. The decline in coal prices is expected to alleviate costs associated with electricity generation, thereby improving profitability for companies engaged in nickel production.

The lower cost of coal as a major input component in the production process has a cascading effect on nickel production costs. It eases pressure from high nickel ore costs, which form a substantial portion of the production cost structure. This trend is expected to persist for some time, bringing positive implications for the nickel industry and its profitability.

6. Global Market Dynamics and Coal Trade Flows:

The evolving dynamics of the global coal market have led to shifts in coal trade flows and trade patterns. With excess supply in major consumption regions, exporters are increasingly targeting high-demand regions in Asia, such as China. The appetite for coal in China remains significant, considering its status as the world's largest consumer of coal and its reliance on coal as a primary source of energy.

China's economic recovery and increasing electricity demand have contributed to sustained high coal consumption in the country. The continued high consumption has prompted China to import coal to balance domestic prices and meet demand. As a result, global exporters are redirecting their supplies to the Chinese market, as it has the capacity to absorb significant volumes without going through lengthy tender processes.

This shift in trade flows is notable amid weaker Asian demand and declining thermal coal prices. The drop in prices is driven by factors such as weaker industrial activity, subdued economic recovery, and record-high domestic coal inventories in China. While the current circumstances have led to sellers redirecting supplies to China, traditional trade flows are expected to resume once market conditions stabilize. Nonetheless, the coal market's future will continue to be influenced by various factors, including geopolitical tensions, economic developments, and efforts to combat climate change.

These global market dynamics highlight the interconnectedness of the coal trade, energy demand, and environmental considerations. The transition to cleaner energy sources and the ongoing debate surrounding the role of coal in the global energy mix will shape the future trajectory of the coal market and its trade flows.