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Thermal coal shortage to fuel global coal prices further

* Last week, South African thermal coal price for RB1 6000NAR was up ~2%. In the last fortnight, it rose ~9% reflecting strong buying from Europe and lack of high calorific value coal.

* We believe demand will continue to improve through the European winters and COAL will be the key beneficiary as its e-auction premiums will continue to expand fueled by demand from the non-regulatory sector.

* Steel giant POSCO’s key facility at Pohang was on the path of typhoon Hinnamnor, resulting in minor damages and flooding of the facility. The company had shut the operations entirely for some time as a measure of precaution. It will restart one of the three BFs soon. We believe HRC price could remain stable this week supported by lower production at POSCO.

* However, on a MoM basis, we expect steel price to continue its downward trend.

* China’s Aug’22 steel exports were down 7.8% MoM to 6.15mt, but continued to tread 21.8% higher YoY on higher production and lower domestic demand.

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