ASIA THERMAL COAL: Coastal freight hands price advantage to Chinese domestic coal

2014-03-28

Softer coastal freight rates for shipping domestic thermal coal from northern to southern ports in China has put seaborne-traded cargoes at a slight price disadvantage, and renewed downward pressure on CFR South China prices, said traders Thursday in Asia trade.

Charter rates on 50,000 mt cargo vessels on the Qinhuangdao to Guangzhou coal trading route around China's coastline retraced to Yuan 42/mt (about $6.80/mt) from Yuan 52/mt one week ago, market sources in China said.

Lower coastal freight increases the competitiveness of 5,500 kcal/kg NAR domestic coal compared to imported fuel of the same calorific value that is shipped longer distances from Australia, Indonesia and South Africa.

"[Capesize] freight rates have stayed at a high level though they have eased a little in the past two days," said a trader in China's Fujian province referring to seaborne cargo rates.

He quoted a rate of $14-15/mt for Capesize ships sailing from eastern Australia to south China.

The Fujian-based trader was offered a Capesize cargo of 5,500 kcal/kg NAR high-ash Australian thermal coal at $76.50/mt CFR for early May delivery, and another May-arrival cargo from Australia was heard offered in the Chinese market at $77/mt.

A bid-offer spread of $74.75-77/mt was heard on cargoes of Australian and South African 5,500 kcal/kg NAR thermal coal through broker Marex Spectron in Asia trade, Thursday.

"I think Chinese buyers may have to pay up, for there is not much 5,500 kcal/kg NAR South African thermal coal in the market for Q2 delivery," said a Singapore-based trader.

Indonesian mid-calorific value thermal coal continues to attract interest from Chinese buyers.

"There are offers for Indonesian 5,500 kcal/kg NAR thermal coal at around $67/mt FOB to bids at $64/mt," said an Indonesia-based trader.

His company did not usually trade this grade of thermal coal because it was not as widely available as other Indonesian qualities, he added.

China's domestic 5,500 kcal/kg NAR thermal coal market remained range-bound at about Yuan 515-520/mt FOB Qinhuangdao including 17% VAT.

At the close of Asia trade Thursday, the Platts/Fenwei China Coal Index (CCI 1) for domestic thermal coal traded at Qinhuangdao port was assessed at Yuan 517.50/mt FOB inclusive of VAT, and steady on-day.

The CFR South China (CCI 8) price was assessed at $74.80/mt basis 5,500 kcal/kg NAR, excluding Chinese VAT, and was 10 cents lower on the day.

In the FOB Newcastle spot market for thermal coal participants continued to wait for a settlement price for Japanese supply contracts starting April 1, which could soon follow this week's second quarter price agreements for Australian coking coal, said traders.

A June-loading parcel for 25,000 mt of Newcastle 6,000 kcal/kg NAR thermal coal was bid onscreen at $73/mt FOB to selling interest at $74/mt in Asia trade after a 50,000 mt cargo for shipment in June traded Wednesday on globalCOAL at $73.75/mt FOB, and $1.50-1.75/mt lower than the last June-loading trades on March 18 at $75.25-75.50/mt on globalCOAL.

Australia's Bureau of Resources and Energy Economics came out Wednesday with a forecast price of $81/mt FOB Newcastle for Japanese financial year April 2014-March 2015 contracts for Australian 6,322 kcal/kg GAR thermal coal, for which negotiations are currently underway in Japan.

"Given the extended period of low Newcastle spot prices in the lead up to these negotiations, the benchmark contract price is forecast to decline by 15% to be settled at $81/mt," said BREE in a report for the quarter to end-March, Wednesday.

In the high-ash Australian thermal coal market, prices have firmed slightly on better-priced Chinese bids at $61-62/mt FOB during Asia trade.

Platts assessed the FOB Newcastle price for 5,500 kcal/kg NAR thermal coal with typical ash of 20% for loading in the next 7-45 days at $63.40/mt, and steady on-day.

Source from : Platts

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