US tariffs create massive uncertainty, sending markets lower, while coal switch drives petcoke down

The global markets collapsed after the US administration declared unprecedented customs tariffs.  At the time of writing, the full impact on stock markets and the potential influence on the global demand remains unknown, sending the energy complex lower. The VIX index, the fear index, rallied from 20 to 60 points, a level unseen since the COVID lockdown. At present, the situation remains highly uncertain and fluid. 

On the broader geopolitical stage, ceasefire talks concerning the ongoing war in Ukraine continue to drag on. The time for central banks to respond to this turmoil by lowering interest rates is drawing closer, but at the same time inflation may rise based on the tariffs. 

The CRB commodity index declined from 310 to 288 on demand fears. In March the European Central Bank cut its interest rate by 0.25 per cent to 2.5 per cent, while the Federal Reserve kept its range unchanged in anticipation of the tariffs’ impact. 

The US dollar fell on both the broad US$ index (by six per cent) and the euro and is now testing resistance at US$1.0950, up from EUR1.0850, and expecting a higher range of US$1.07-1.1250. Brannvoll ApS expects a range of US$1.05-1.15, with an average of US$1.12. 
 
Oil 
It has been another monthly fall in the energy complex, driven down by demand fear led by the oil market and the fact that OPEC+ seems determined to increase production despite the price being below US$70, the very pain threshold the market expects OPEC+ to defend. US production is at a record high and, if sanctions on Russia were lifted, Russian oil could hit the market as well, far outweighing the impact of potential sanctions on Iranian and Venezuelan exports.

The uncertainty of the next weeks will likely lead to further pessimism until the effects of tariffs become clearer for the markets. The TTF gas market has fallen back as well, sending Cal26 back to EUR35 (US$38.20) levels and the EU looking to replenish their gas stocks, which are very low.  Brent oil traded nine per cent lower at US$64, moving to a lower range of US$60-75. Brannvoll ApS forecasts a trading range of US$65-90 and average of US$75 for 2025.

Coal
The coal market had already fallen in previous months and maintained these levels. This is despite ample supply, with Chinese and Indian output increasing and their domestic prices falling. Less demand from Japan, Taiwan and South Korea has seen Newcastle coal falling to US$100. Stock in Chinese ports is very high, which is further lowering demand. Russian producers are selling below production rate and there are further mine closures in Russia and Australia.

A joker on all bulk energy commodities will be the tariff on Chinese-built vessels, which could add up to US$30 for freight and create a new dual freight market.  The API2 3Q25/front-quarter (FQ) ‘new’ contract rose by four per cent MoM to US$100, within the short-term range of US$95-105.  The Cal26 contract increased four per cent to US$107. Brannvoll forecasts a range of US$100-130 and an average of US$125 for the FQ contract.

The API4 FQ25 contract fell three per cent to US$89, temporarily in a low range of US$90-105. The API4 Cal26 fell  three per cent to US$96.00 – now in a lower range of US$90-105, while the spread to API2 increased Brannvoll ApS maintains the forecast range of US$100-130 in 2025 for API4.

Petcoke 
As forecast, the petcoke market has reacted downwards, with very low discounts leading cement producers and other users to make a quick switch towards coal. Russian and Colombian coal sellers have reported increased demand. But Chinese and Indian buyers who were very active in February have been stepping away from the markets, leaving many traders long on high levels now offering lower prices. Indian buyers are now switching to US NAPP and Australian coal. The potential introduction of disruption to the freight market with Chinese-built ships impacted by tariffs is deterring spot business.

However, the still-low coal prices are keeping both FOB and ARA discounts at such a level that petcoke is seen as expensive unless it drops further.

The USGC FOB 6.5 per cent sulphur (S) contract was down by five per cent MoM to US$80 and the discount to API4 unchanged at 28 per cent. The USGC ARA 6.5 per cent contract fell four per cent MoM to US$98.50 MoM but with the discount rising from 14 to 21 per cent. 

The USGC FOB 4.5 per cent S contract fell by two per cent MoM to US$88, with the FOB discount to API4 falling to 21 per cent. The CFR ARA 4.5 per cent contract dropped two per cent to US$106.50. The discount was rising to 15 per cent due to higher coal.

by Frank O. Brannvoll, Brannvoll ApS, Denmark