Colder weather across northeast Asia, combined with coal export disruptions in Indonesia, continued to support South Korea-delivered coal prices this week.
Argus assessed NAR 5,800 kcal/kg cfr South Korea at $187.29/t, up by $14.18/t on the week.
Coal shipment delays caused by the export ban in Indonesia prompted South Korean buyers to resume buying activities earlier than expected.
State-owned Korea South-East Power (Koen) procured 400,000t of NAR 5,800 kcal/kg Russian coal at a $1.30/t premium to GC indices, which requires one cargo to be shipped quarterly in January-September, according to sources. The coal should have a sulphur content of 0.4pc and 17pc ash.
Colder weather, combined with record-high domestic LNG prices in South Korea, have boosted demand for coal burn so far this month, tightening supply-demand fundamentals. The Korea Metrological Agency issued cold wave warnings this week, with temperatures in Seoul falling as low as minus 11.3°C on 12 January, according to data provided by the agency. A sudden drop in temperatures boosted the country's power demand, with daily peak demand remaining well above the 2016-20 seasonal range (see chart).
Generation economics in South Korea favour coal burn based on state-incumbent Kogas' January power-sector tariff, which means any growth in thermal generation is likely to lift coal burn, with the government allowing flexibility to ramp up output under its winter restriction programme.
Koen initially planned to take its 500MW Samcheonpo units 5 and 6 off for the whole seasonal restriction period in December-March but brought unit 5 on line on 3 January. The restriction on unit 6 is scheduled to end on 31 January, according to the latest plant maintenance schedule published by the Korea Power Exchange (KPX).
State-owned Kepco utilities' combined coal availability is now scheduled to average 27.8GW this month, compared with 26.9GW and 21.2GW coal-fired output a year earlier.
Assuming a flat load factor year on year, Kepco's coal-fired output may increase to 22GW this month, according to Argus analysis.
Growth in coal availability comes despite firmer nuclear availability this year. South Korea's nuclear availability is scheduled to average 21.1GW in January, which could result in year-on-year growth of more than 3GW in nuclear output, according to Argus analysis.
Tighter power fundamentals support thermal margins in Japan
Unplanned outages across Japan's thermal generation units and weaker solar output sent power prices higher this week, further supporting margins for coal generators.
A series of oil, gas and coal-fired units have been shut since the end of last week due to technical issues, including J-Power's 700MW Takehara coal unit 3, Nakoso IGCC Power's 525MW coal unit and Jera's 1GW Hekinan coal unit 5. Lower thermal output came despite weaker solar output in Japan amid fewer daylight hours, while overall power demand increased by 13pc on the week due to colder weather.
Tighter power fundamentals lifted Japan Electric Power Exchange's (Jepx) system-wide average day-ahead power prices to ¥21.72/kWh ($193/MWh) on 8-14 January, up by 13.7pc from a week earlier.
Stronger power prices continued to improve margins for thermal generators, with the clean-dark-spread for a 44pc efficient coal unit averaging ¥12,855/MWh ($112.99/MWh) on 7-13 January, up by 17pc on the week, based on Argus spot coal and freight assessments and Jepx day-ahead system prices.
Clean-spark-spreads (CSS) for gas units running on spot LNG also turned positive, with theoretical margins for a 58pc efficient gas unit averaging ¥1,675/MWh, compared with the previous week's CSS of minus ¥254/MWh, based on Argus' northeast Asia des spot LNG prices.
Temperatures in Japan are forecast to remain below the seasonal norm for most days during the next fortnight by as much as 2.47°C, according to Speedwell weather data.
