The Richards Bay FOB physical thermal coal market extended its bear run Friday as a South African origin cargo traded at the lowest level in the Atlantic market in over three months.
The 50,000 mt South African origin March-loading cargo traded at $78.60/mt FOB via Atlantic Brokers with exchange of futures for physical (EFP) terms attached, over $2 below the last March trade Wednesday and the lowest since October 18, 2013.
Sources said a trading house bought the cargo from a northwest European utility trader.
South African 6,000 kcal/kg NAR thermal coal prices had been supported for most of the fourth quarter of 2013 following strong physical bids on the part of a large trading house which had taken a large implied freight (CIF ARA-Richards Bay FOB) position.
As part of the trading strategy, the company shipped large volumes of South African 6,000 kcal/kg NAR cargoes to Europe, despite spot cargoes not pricing into the CIF ARA market.
At the start of 2014, Platts data showed that spot Richards Bay 6,000 kcal/kg NAR coal prices started to ease to $81.50/mt FOB, their lowest since early December, after the support from the trading house dwindled with lower liquidity.
But after Colombian thermal coal exports from US miner Drummond were effectively banned by the Colombian government on January 8 due to the company's non-compliance with environmental regulations forcing all coal terminals to have direct loading systems from the New Year onwards, market players started to look once more at South African material for replacement cargoes.
Spot Richards Bay FOB prices rose over $5 to a peak of $87.35/mt on January 17, at their highest since Platts' 7-45 day assessment window started in March 1, 2013.
Since the start of this week, however, market players in the Atlantic thermal coal market reassessed initial supply panic over the lack of Drummond's Colombian cargoes, considering that European utilities and port thermal coal stocks were at higher levels than expected for the year after a mild winter season and the surplus availability of US, South African and Russian coal in the market outweighing any possible shortage.
At the same time, in the Asia-Pacific thermal coal market, major buyers of high calorific value South African coal have shown scant interest in spot cargoes with Indian customers preferring cheaper Indonesian sub-bituminous material and China opting out of the market until after the upcoming Lunar New Year festivities.
The lack of demand on both the Atlantic and Asia-Pacific markets for South African 6,000 kcal/kg NAR coal lead to Richards Bay FOB spot prices losing over $4 in three days.
Platts last assessed Richards Bay FOB 6,000 kcal/kg thermal coal for loading within the next 7-45 day period at $83/mt Thursday.
European-delivered CIF ARA thermal coal also softened, with a lack of buying interest and comfortable supply availability Friday.
A multi-origin 50,000 mt DES Rotterdam April shipment traded at $81.75/mt via the globalCOAL screen, $1.75 under the last April DES trade on January 15.
Sources said the transaction involved a northwest European utility buying from a trader.
Platts last assessed the price of CIF ARA thermal coal basis 6,000 kcal/kg NAR and for delivery within the next 15-60 days at $83/mt Thursday, at its lowest level since January 7.